The Hindu Business Line : Realty stocks tumble on weakening prices

Market today shaved off some of the additional growth premiums to the valuations of the real estate stocks as short-term weakness in their fundamentals impacted investor perception. Analysts, fund managers and investment strategists felt the downward revision in valuations was caused by the slipping property prices and an oversupply situation in short-run.

Mr Gul Teckchandani, a market strategist, said though the sector holds a bright promise in the long-term perspective, softening property prices was being reflected in the current prices of the stocks. Mr Shailesh Kanani of Angel Broking and Mr Ankur Srivastava, MD of global property consultant DTZ India, also felt that there is a confirmed oversupply situation.

Among the BSE sector indices, the 11-share Realty Index witnessed biggest fall (2 per cent) on Monday. Opening weak, the real estate counters turned green, but fell sharply towards the end of the session.

Unitech and India Bulls Real Estate, with respective weight of 16.45 per cent and 31.48 per cent in the index, were largely responsible for today’s decline as they posted losses of 4.05 per cent and 5.82 per cent respectively. DLF (highest weight of 35.21 per cent) managed to finish marginally green, but could not turn the selling tide.

“Prices of residential apartments, especially the luxury projects, will not see any further rise this fiscal. In Gurgaon up-market units may correct by 30 per cent. The housing loan rate may soften, but is unlikely to drop sharply in the next two to three quarters. Hence investment and speculation-led demand is likely to hit the sales volume”, Mr Srivastava said.

IPOs may feel the heat

He felt that the forthcoming equity offerings might not attract investors if the correction continues. Realty firms will depend more on private equity than a float, he added. Another industry expert said: “Developers may not be able to maintain their present EPS growth levels going forward.

Unitech today reported Q1 EPS of Rs 4.29, while HDIL’s announced EPS of Rs 11.26.

DLF’s June quarter EPS stood at Rs 3.77.

Among the today’s winners in the sector, Ansal Infra gained 5.44 per cent and Mahindra Gesco 3.36 per cent. DLF finished up 0.61 per cent.

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