In real estate—particularly housing projects—revenues are typically received in advance, often in instalments from booking tills possession. However, accounting recognition occurs only after the final sale. In contrast, commercial real estate projects usually generate revenue post-completion in the form of rentals (Nirlon or listed REITs being good examples), unless the project follows a pure EPC model. These projects, however, require significant upfront investment in land and construction (unless the land is pre-owned or the arrangement involves rental sharing). For this reason, companies in this segment can provide clear revenue guidance for the upcoming year.
Thus, the key question when assessing a company’s real estate business is whether the revenue stream is one-time, cyclical (linked to project completion), or recurring (as in commercial properties, which can later be monetized through REITs).
For many of Mumbai’s legacy textile mills—which either wound down manufacturing operations or shifted to a brand-licensing model—transitioning into real estate was a logical strategic move. Some, like Phoenix Mills, developed and retained their own projects to generate recurring income. Others, such as Morarjee Goculdas Mills (now Peninsula Land, part of the Piramal group), developed and sold their projects, creating a one-time revenue stream that has since tapered off. Bombay Dyeing is currently in a similar transitional phase, developing/under development on half of land while having sold remaining half.
If own land is used at costs from long time back, any return metric would be too high, till it lasts. The question becomes, whether they have track record for generating good return if adjusted for cost of land in current times than may be close to zero cost in books.
In the case of Raymond, the key question is whether their projects represent a recurring revenue model or are primarily one-time developments limited to their existing land bank. Most of Raymond’s major land holdings—likely legacy factory land—are located in Thane (60 Acres Remaining), while newer projects are being undertaken through Joint Development Agreements (JDAs). The extent of revenue sharing with the original landowners, however, is not fully clear in the JDAs. Typically, JDAs are structured around revenue-sharing arrangements (from either rentals or housing sales), with the developer bearing the project costs. In case of SRA projects , it would be providing rents till development as well as 300 to 350 square flat to all the ealier owners.
According to Care Ratings Report,
RRL, through its subsidiaries, plans to launch five new projects in emerging micro-markets through five joint development agreements (JDAs) over the next year, encompassing a total carpet area of over 30 lsf and a project cost exceeding ₹8,000 crore. This expansion exposes the group to considerable execution and marketing risks. The developer remains exposed to competition from established players in these markets, and adverse demand fluctuations could further elevate execution risk. Considering two of these five projects involve slum rehabilitation, the group is also subject to regulatory risks and depends on the timely completion of the rehabilitation component. Consequently, the timely completion, ongoing execution and expansion in the real estate sector while maintaining a comfortable financial risk profile will remain monitorable.
Given that large-scale real estate projects typically require five years or more for development, revenue visibility beyond the next one or two fiscal years does not follow a factory-style production model. Instead, revenues can fluctuate sharply—doubling or tripling when a project is completed, or declining significantly in periods without one. For example, if we take the biggest player in India, DLF. Below is their revenue from last 20+ years (Numbers from IPO Prospects, AR/screener.in and might vary little bit depending on corrections in following years)
| FY | Operating Revenue | Other/Exceptional Income | Total |
|---|---|---|---|
| 2005 | 608 | 18 | 626 |
| 2006 | 1154 | 72 | 1242 |
| 2007 | 2674 | 1379 | 4053 |
| 2008 | 14437 | 247 | 14684 |
| 2009 | 10035 | 396 | 10431 |
| 2010 | 7423 | 428 | 7851 |
| 2011 | 9561 | 565 | 10126 |
| 2012 | 9576 | 836 | 10412 |
| 2013 | 7773 | 1279 | 9052 |
| 2014 | 8298 | 1133 | 9431 |
| 2015 | 7649 | 503 | 8152 |
| 2016 | 9926 | 506 | 10432 |
| 2017 | 8221 | 1135 | 9356 |
| 2018 | 6707 | 9722 | 16429 |
| 2019 | 8366 | 784 | 9150 |
| 2020 | 6083 | 1135 | 7218 |
| 2021 | 5414 | 383 | 5797 |
| 2022 | 5717 | 195 | 5912 |
| 2023 | 5695 | 317 | 6012 |
| 2024 | 6427 | 531 | 6958 |
Disclaimer:
General comment, No opinion on price.
Not a financial advice, No positions in this stock