>Real Estate (MOTILAL OSWAL)

• 3QFY09 marked the end of all pretence by developers: While the real estate sector
has been in a downturn since September 2007, 3QFY09 would be remembered as the
quarter when most developers came out of their denial mode and acknowledged the severity
of the downturn in the real estate industry. Several companies announced drastic measures
to effectively deal with the situation: i) suspending several ongoing projects, ii) postponing
new launches, iii) recalibrating development plans etc. Most companies revised downwards
their guidance for delivery, sales and profits by 50-70%.

•RBI announced a bailout package for real estate sector: Another significant event
during 3QFY09 was RBI’s bailout package for the real estate sector. RBI allowed banks
to undertake initial restructuring of commercial loans of real estate companies till June
2009, without the loans being classified as NPAs. Consequently, most real estate companies
used the window provided by RBI to refinance or reschedule their debt repayments
obligation falling due up to March 2009.

•EBITDA margin down significantly: During 3QFY09, EBITDA margin was down by
~800bp on an average. EBITDA margins across key RE companies have dropped
significantly largely led by decline in realizations and higher revenue contribution from the
low margin bearing affordable housing segment (as most RE companies reclassified their
products in order to cater to the affordable homes segment).

To see full report: Real Estate