Impact of Liquidity and Leverage on Profitability A Study on Selected Indian Real Estate Companies

Abstract

In India, real estate sector has gained importance and it is expected that the real estate market will move towards a positive direction. Apart from the challenges faced by real estate sector in India in recent years, the diminishing interest rates, the increasing population and the increasing number of constructions transformed India into a popular place in the world for investment in properties. Further, the demand for property increases every year with a massive population growth. In addition, the society understands that financing in real estate business will have future gain. Loans and mortgage facilities are often availed by both the owners and the developers in order to develop or own the property. It should be noted here that real estate sector is the second largest employment generating sector in India after agriculture, which contribute in employment significantly. The contribution of the real estate companies to the Gross Domestic Product (GDP) of India has been estimated within the range from 6.5% to 7%, and the sector is expected to generate millions of jobs. Under this backdrop, the study aims to investigate the impact of liquidity and leverage on profitability of the selected Indian real estate companies. During the period from 2011-12 to 2018-19, 21 Indian real estate companies have performed better in terms of revenue generation as reported in their annual reports. All these 21 Indian real estate companies which have continuously performed well in the market, traded in NSE and BSE are considered for the study. The data are collected from the audited balance sheet and profit and loss statement of the selected real estate companies. Financial statement newlinevi newlineof the selected companies has been critically analyzed with the help of statistical tools like ratio analysis, arithmetic mean, standard deviation, co-efficient of variation. Statistical techniques like correlation analysis, kendall s coefficient of concordance, and regression analysis have been used to measure the impact of liquidity and leverage