Flush with cash from the stepped-up demand for homes, real estate developers are using the liquidity to buy more land, for business development, and, in some cases, reward shareholders.
According to data compiled by Nuvama Institutional Equities, the top 16 listed realty companies had operating cash flows close to ₹19,000 crore in the first half of FY24. Of this Godrej Properties and Prestige Estates Projects accounted for slightly over 40 per cent — Godrej raised almost the entire amount from debt, while Prestige Estates’ flows were distributed between operating cash profit, debt, and flows from joint ventures and subsidiaries.
Many of the companies have been able to improve their operating cash flow as they have deleveraged over the last two years, leaving them with more funds.
Major developers have indicated that while debt reduction is on their list of priorities, they also do not want to lose out on the current demand.
The data shows the cash has been used in business development, capex, working capital, and repaying debt in some cases.
Macrotech Developers (Lodha) and Godrej Properties, for instance, are both entering new geographies with a focus on more launches and projects. Phoenix Mills, Oberoi Realty and Prestige Estates have spent significant amounts on capex in H1, the data showed.
Lodha, which generated the most operating cash flow, is aiming to exceed its guidance on business development for the year, and Chief Executive Officer Abhishek Lodha said it was seeing opportunities for good deals across multiple locations. It has used more than 60 per cent of its cash flow in loan repayments and interest payments. A significant portion has also been used in investments and business development.
Godrej Properties has been buying land for added growth and market share, and Executive Chairman Pirojsha Godrej said that, while the company may not be adding land and projects at the same pace, it would focus on targeted business development for continued growth beyond the next three years. It has used its debt funds mainly for working capital requirements and investments.
Prestige Estates has been spending considerably on acquiring land banks and on construction. The company’s cash operating profit was augmented by debt and the management admitted that it needs to secure land banks to sustain future launches. It also said that its borrowings will increase for investments in land.
Gurugram-based DLF already has a substantial land bank and has spent a good portion of its cash flows on dividend payout, investments in financial securities, and joint ventures. The company is also focused on increasing its sales and gaining market share.