* Sorouh Q3 consolidated profit 129 mln dirhams
* Aldar Q3 net profit 206 mln dirhams, vs 144 mln
* Merger talks at advanced stage
* Due diligence almost complete - Sorouh CFO (Adds Aldar earnings, Sorouh conference call)
By Praveen Menon
DUBAI, Nov 7(Reuters) - Abu Dhabi's top two developers - Aldar Properties and Sorouh Real Estate - said their government-backed talks were at an advanced stage.
The two companies also both reported higher quarterly profit on Wednesday, albeit with impairments and asset writedowns as valuations fell, highlighting glum conditions.
Their merger talks were started against the backdrop of continuing oversupply and declining house prices. Prices in Abu Dhabi were expected to fall 5 percent this year, a Reuters poll found.
"The due diligence is pretty much complete. It is only a matter of a little more patience before a final announcement," Sorouh Real Estate chief financial officer Richard Amos said.
"These things take quite a lot of time," he said. The two companies, which started talks in March, had previously said a decision on whether to merge would be reached by June.
Aldar - the larger company and which built the Yas Marina Formula One Circuit, home to the Abu Dhabi Grand Prix - said a valuation review ahead had prompted it to write down 737 million dirhams ($201 million), mainly related to hotel assets.
Aldar took provisions for impairments and write-offs of 932 million dirhams, compared with 2.5 million a year ago.
Sorouh took a fair value loss of 126.5 million dirhams on investments.
Abu Dhabi has spent over $10 billion on Aldar, equivalent to the amount it needed to rescue Dubai from a bond default in 2009. In return, land on Al Raha beach, the Ferrari World Theme Park, and other key assets, were sold to the government.
Aldar posted a 43 percent rise in third-quarter net profit to 206 million dirhams, on revenue that nearly halved to 1.6 billion. Profit grew as the company wrote back 431.5 million dirhams of excess accruals and recoverable costs written off previously.
Meanwhile, Sorouh reported a net consolidated profit of 129 million dirhams, up 55 percent. Income got a boost after Sorouh reversed 40 million dirhams in contingency provisions for its Sun and Sky towers, which have been completed. Quarterly revenue fell 9.8 percent to 803 million dirhams.
The developer said its results were buoyed by revenue from national housing projects - government-awarded schemes to build homes for UAE citizens - which rose to 607 million dirhams from 68 million.
Shares in Aldar and Sorouh were both down 2.2 percent at 0930 GMT. ($1 = 3.6730 UAE dirhams) (Editing by Dan Lalor and Amran Abocar)