Beaten-down real estate stocks on Wednesday found favour with investors, with the BSE Realty Index becoming the biggest gainer of the day. The Street expects the ensuing GST Council meet to announce a slew of sops for the sector. Besides, the RBI’s move on Tuesday to boost liquidity also turned sentiments in favour of the sector. There is also a moderate pick-up in housing sales in some of the prime markets, say analysts.
While the BSE Realty index jumped 3.11 per cent, the Nifty Realty index edged up 2.95 per cent. Indiabulls Real Estate was the biggest gainer, surging 8.64 per cent to close at ₹90.55 on the NSE, followed by DLF 7.55 per cent at ₹192.8 and Sunteck Realty 2.97 per cent at ₹360.30.
The GST Council, which is scheduled to meet on Saturday, may take up the issue of reducing the Goods and Services Tax to 18 per cent from 28 per cent on a range of goods, including cement. Cement being the one of the major raw materials, any cut in the tax rate will directly boost the bottomline of real estate companies, stock brokers say.
According to marketmen, the Finance Ministry is in favour of big-ticket GST rate rejig to revive the housing market. Marketmen say GST on housing may be reduced to 8 per cent (on par with affordable housing scheme).
Nil input tax credit
There is also talk that the rates may be slashed to 5 per cent without input tax credit. “However, though this proposal may increase the sales volume, for builders it will turn more expensive,” said an analyst with a domestic brokerage.
The RBI, on Tuesday, said it has decided to scale-up the amounts to be purchased in the remaining two open market operation (OMO) auctions scheduled in December 2018 to ₹15,000 crore each. Through this, the central bank said that it would inject ₹50,000 crore of liquidity in December.
“Markets are expecting a low interest rate environment and pro-growth policies by the new RBI Governor to reduce the credit squeeze and spur growth,” said Viral Berawala, CIO, Essel Mutual Fund.