Prominent players in the real estate market, such as DLF, Unitech, Parsvnath, and Omaxe, are facing considerable challenges due to a notable economic slowdown that has significantly impacted their advance tax payments. With dwindling sales and a tight liquidity situation, DLF has reported no advance tax payment for September in this financial year, a stark contrast to the Rs 37 crore it paid during the same period last year.
Rohtas Goel, the CMD of Omaxe, stated, "It’s a general slowdown in the real estate sector which is showing in the advance tax figures." Omaxe, too, has not paid any tax for the September quarter, compared to Rs 37.5 crore in the previous year.
The downturn in the real estate industry was vividly reflected in stock market activity on Monday, where the BSE realty index plummeted by 5.26%. DLF's stock even hit an all-time intra-day low of 329, despite its prior announcement regarding a share buyback initiative.
Meanwhile, Unitech has experienced an advance tax decline of 50%, with payments dropping to Rs 50 crore. Similarly, HDIL has reported no payments this year, down from Rs 30 crore last year. Sobha Developers also felt the pinch, with its September tax payment dropping 60%, from Rs 12.5 crore in September 2007 to just Rs 5 crore now. Ansal Properties & Infrastructure has seen its advance tax payment halved as well, settling at Rs 5 crore compared to the same quarter last year. Parsvnath has recorded a 20% reduction, now at Rs 20 crore.
A senior executive from Unitech observed that real estate companies typically operate through numerous subsidiaries, which means the advance tax figures of the parent company might not paint a complete picture of the entire group's financial health. Conversely, Ambareesh Baliga, Vice-President at Karvy Stock Broking, commented, "Given the current market scenario when real estate stocks are getting hammered every day, all listed firms would like to show a better profit in the parent company rather than subsidiary."
Among other reasons for the drop in advance tax, one industry executive pointed to a liquidity crunch. He noted, "Companies may have better profit but not enough cash to pay tax.” Baliga remarked that firms cannot afford to neglect tax payments, even when profitability is apparent. "At best, they can defer booking profit to the next quarter if they don’t have enough cash to pay tax," he explained.
In the meantime, DLF’s announcement regarding its share buyback does not appear to have stabilized its falling share price. A spokesperson for DLF mentioned, "The impact of buyback announcement was not visible on our share price because we have not started the action yet."