The Hindu Business Line : Realty stocks make good recovery

Real estate stocks made decent recovery on expected relief. Dalal Street hoped for incentives for low-cost housing and lower interest rates for buyers as well as developers.

The BSE Realty Index on Thursday outperformed the benchmark index, Sensex.

The Centre is reportedly preparing an Rs 75,000-crore stimulus package this weekend, primarily to boost economic growth and employment through this sector.

Realty counters had severely been hammered down in aftershocks of global financial crisis, local shortage of liquidity and higher interest rates. Large realty stocks faced dry liquidity situation, sharp lower demand, particularly from speculative investors and cost escalations and project delays. Some of them were brought to their knees, when they had paid up over 30 per cent from private borrowings as even the private equity players turned cold and overseas funds were restricted.

“If they are allowed to reschedule their debt and if the Government relaxes the norms for external commercial borrowing, the sector would get a lifeline,” said an analyst with a foreign institution’s broking arm.

According an industry professional, the current declines in commodity prices, particularly steel and cement, also has been some kind of natural relief to the realty sectors. “But it is already a case of milk that has soured. Most of the players cannot cut their prices beyond a point. Already, 15-20 per cent correction has taken place in the property prices. The commercial properties, which are incomplete, have become a burden since realtors get paid after the project is over and become saleable. The housing sector has seen the premium segment demand dry out substantially as investors (and not the prospective dwellers) left the market.”

A housing finance company official said a directed liquidity coupled with interest relief might be of great help to resurrect the realty market to a great extent.

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