The Hindu Business Line : Realty stocks tank, yet again

Real estate stocks continued to be hammered on Tuesday as well. BSE’s Realty index tanked the most among all the indices during the day’s trading. The index shed a massive 487 points, to end the day at 8953.95. That was a massive 5.43 per cent against the Sensex fall of 2.03 per cent. Among the hardest hit were: Akruti City (9.51 per cent), Housing Development and Infrastructure Ltd (9.97 per cent), IndiaBulls Real Estate (7.6 per cent) DLF Ltd (5.11 per cent).

Sentiment weak

The Delhi based real estate developer DLF Ltd was also among the biggest losers of the day on the Sensex.

Real estate scrips have been falling, with the RBI keeping the interest rates unchanged.

So, when the overall market sentiment is weak, real estate stocks tend to perform very poorly, said analysts tracking real estate sector.

“The Union Budget 2008-09 failed to extend major benefits to the real estate sector. There were many expectations from the Budget like liberal policy on REITs and REMFs, introduction of Value Added Stamp Duty, some benefits for rental income and some reforms on FDI provisions. But, there were no such announcements in the Budget and the sector as such was totally ignored,” Angel Broking said in its Budget review paper.

“The third quarter monetary policy of the RBI did very little to lift the spirits of the realty sector as it kept key rates unchanged. This triggered the downward swing in realty sector,” said Mr Shailesh Kanani, an infrastructure and real estate analyst with Angel Broking Ltd.

The property rates, which have been rising in the last two to three years, are beginning to settle down, said Mr Kanani.

Now with the dip in real estate prices, the revenues of the builders will also fall, explained Ms Anita Gandhi, Head Institutional Business, Arihant Capital Markets Ltd.

Bearish phase

While the supply of housing stock is increasing, affordability is not keeping pace. “Everyday there are announcements of new projects being launched by real estate companies, but there is a lot of disparity between the number of projects and the number of people who can actually afford and want to invest in these projects,” said an analyst with a brokerage.

In the present market scenario, marketmen say that it will be a while before the sector revives. “There was a lot of euphoria about this sector during the recent bull rally. Scrips posted their 52-week highs during this time; but now, as the markets are going through a bearish phase, investors feel that real estate companies are overvalued. This has added to the selling pressure,” said a head of research with a brokerage.

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