The Hindu Business Line : Realty, housing finance stocks losing ground on liquidity concerns

Kolkata, Jan. 31 Realty and housing finance companies continued to lose ground on Dalal Street as the overall sentiment has undergone a change following RBI’s recent re-emphasis on concern over the liquidity-driven asset bubble. According to market sources, developers are facing a fall in demand and valuations are being questioned.

A Delhi-based real estate consultant told Business Line that for some developers, demand for properties in the last one moth have shrunk to 20 per cent of that in December 2007. However, developers are still putting up a valiant attempt to downplay the demand slump in both commercial as well as residential properties.

Mr Hemant Shah, Chairman of Akruti Nirman, said: “There is demand for good quality products”. As the market dynamics were changing, the focus has shifted from location to quality, value additions, delivery and intangibles like trust, he added.

Of the 14 listed realty stocks on the BSE, 11 declined on Thursday while three managed to finish in the green. BSE Realty index has shed over 22 per cent in the last one month. Of the five BSE-listed counters of housing finance companies, two small stocks shot up with limited volumes and rest were in the red on a weekly basis too.

Asset inflation

Early this month, RBI did not signal permission to the sector to enjoy a softer rate regime as it continued to be worried over asset inflation. “Softer bias is unlikely unless there is a strong return of overseas inflow of liquidity,” said an official with a housing finance company.

In the policy statement before the busy season, the Central bank had noted a huge incremental growth in bank lending to the realty sector — both to developers and the retail segment. The RBI had noted that as many as 10 banks had transgressed lending norms to the sector.

According to sources in the housing finance sector, the monetary regulator is unlikely to relent on firm interest rates to the sector except for an “economy class” residential property development in the near future. The outlook in the next six months to a year is likely to remain subdued and the fancy valuations may become a thing of the past, analysts seem to suggest.

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