Real Estate Developers See Profitability Rise but Cash Flows Strain in FY25: Nuvama
Indian real estate developers reported improved profitability in FY25, with cash EBITDA margins rising to 42%. However, cash flows weakened due to increased working capital requirements and moderating sales momentum.
Real EstateCash FlowProfitabilityHousing CycleDevelopersReal EstateSep 14, 2025
Nuvama’s study of 23 developers showed that industry-wide cash EBITDA margins improved to 42% in FY25, compared with 40% in FY24, as absolute cash operating profits rose 16% year-on-year. However, with sales momentum moderating and unsold inventory inching up, a trend typical of the middle stage of a housing cycle—developers saw a build-up in working capital.
Only nine of the 23 developers reported a release of working capital in FY25 versus 12 in FY24. “Consequently, operating cash flow faltered a bit in FY25,” the brokerage said.
Divergence across developers
Nuvama noted that cash flow generation varied widely across developers. While DLF, Lodha, and Rustomjee reported high cash EBITDA margins, peers such as Puravankara, Sobha, and Brigade were at the lower end of the spectrum.
On the FCF front, DLF generated the highest free cash flow (cash PAT less land/annuity capex), followed by Shriram Properties and Kolte-Patil. In contrast, Prestige Estates, Puravankara, and Godrej Properties recorded deficits, largely due to elevated annuity capex.
At an industry level, FCF weakened in FY25, with only four developers generating positive free cash flow compared with eight in FY24. Signature Global, Kolte-Patil, and DLF improved their FCF positions year-on-year, while Sobha, Lodha, and Prestige reported deterioration.
The analysis also revealed that while three-fourths of cash flows at Oberoi Realty and Sunteck Realty came from operating profits, Godrej Properties and Aditya Birla Real Estate leaned heavily on external funding. Despite low leverage levels, 11 of the 23 companies raised equity funds in FY25, reflecting continued debt aversion.
Outlook: Margins steady, working capital intensity to rise
Looking ahead, Nuvama expects profitability to stabilise but flagged that working capital intensity could rise further due to a pickup in construction activity, moderation in home-buying frenzy, and low levels of finished inventory.
“We believe the increase in house prices will moderate, capping a margin improvement. Given land capex is likely to remain high, this should keep cash flow generation in check,” the brokerage said.
Within its coverage, Nuvama retained ‘BUY’ ratings on Prestige Estates and Brigade, calling them its top sectoral picks.
(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
Frequently Asked Questions
What is the current state of cash EBITDA margins for real estate developers in FY25?
Cash EBITDA margins for real estate developers improved to 42% in FY25, up from 40% in FY24, as absolute cash operating profits rose 16% year-on-year.
Why did cash flows weaken for real estate developers in FY25?
Cash flows weakened due to increased working capital requirements and moderating sales momentum, leading to a build-up in working capital.
Which developers reported high cash EBITDA margins?
DLF, Lodha, and Rustomjee reported high cash EBITDA margins in FY25.
What is the outlook for profitability and working capital intensity in the real estate sector?
Nuvama expects profitability to stabilize, but working capital intensity could rise further due to increased construction activity, moderating home-buying momentum, and low levels of finished inventory.
Which developers did Nuvama retain a 'BUY' rating on?
Nuvama retained 'BUY' ratings on Prestige Estates and Brigade, calling them its top sectoral picks.
Related News Articles
Pune's PCNTDA Residents to Get Freehold Status, Promises Maharashtra Minister Uday Samant
Maharashtra Minister Uday Samant has assured PCNTDA residents that a decision will be made on freehold status without causing financial loss to the state government.
Veriff Boosts Biometric Security to Combat Account Takeover Fraud
Biometric authentication, account takeover fraud, identity verification, facial recognition, fraud prevention
Inside Mumbai's Luxurious Abodes: A Glimpse into the Homes of India's Elite
Mumbai, often dubbed the 'Billionaire Capital of Asia,' boasts a real estate landscape that mirrors its status as India's commercial and financial hub. From opulent mansions to sleek high-rises, the city is home to some of the most stunning and expensive
Kapil Sharma: From Rs 500 Salary to Rs 300 Crore Net Worth
Kapil Sharma, the king of Indian comedy, has come a long way from his humble beginnings. Today, he owns luxurious properties and cars, and his net worth is estimated at Rs 300 crore. Explore his inspiring journey from rags to riches.
Mumbai and Delhi Emerge as Leading Luxury Real Estate Markets in Asia-Pacific
India's real estate sector is witnessing a significant boom, driven by robust economic growth, infrastructure improvements, and changing lifestyle trends. Mumbai and Delhi, in particular, are ranking among the fastest-growing luxury real estate markets in
Important Steps to Ensure Your Apartment is Free from Legal Issues Before Purchase
MahaRERA has recently directed a real estate developer near Mumbai to disclose details about any pending litigation to the public. This highlights the importance of checking for legal issues before buying an apartment.