Stocks

Realty scrips gain ground on Maharashtra fee waiver

Chennai | Updated on January 07, 2021

Strong Q3 show by Sobha also lifts sentiment

Realty stocks were in demand on Thursday after Sobha Ltd came out with strong Q3 volumes and the Maharashtra government slashed premiums and levies charged on construction by 50 per cent till December 31.

Analysts turned bullish on real estate counters, as they expect other State governments will also announce similar concession to the sector, which is one of the top job creator.

The BSE Realty index jumped 1.23 per cent on Thursday with Indiabulls Real Estate registering highest gains of 14.3 per cent at ₹89.65. Sobha jumped 7.6 per cent, while Brigade Enterprises, Mahindra Lifespace, Sunteck Relaty, DLF and Prestige Estates gained between 0.5 per cent and 2.5 per cent.

Levy concession

The Maharashtra Government on Wednesday approved a 50 per cent discount/concession on various premiums levied by the government on construction projects till December 31, 2021.

This also includes concessions in the premiums levied by all planning authorities/local administrations in Maharashtra. A rider is that developers availing the discount need to bear the stamp duty cost of 5-6 per cent of the agreement value on behalf of buyers.

Sobha Ltd said that its Q3-FY21 gross sales volumes of 1.13 msf worth ₹890 crore were up 6 per cent y-o-y in volume terms and 22 per cent in value terms. A strong q-o-q uptick in Bengaluru and continued momentum in Kochi/Gurugram markets have enabled Sobha to cross pre-Covid sales bookings in spite of minimal launches.

To boost buyers’ interest

Manju Yagnik, VCP, Nahar Group and Senior Vice President, NAREDCO, said: “Reduction in construction premium will surely bring down the project cost thereby reducing property prices across Mumbai andekindling buyers' interest. This decision to reduce the premium after stamp duty reduction and ready reckoner rates is a welcome move and showcases the government’s support to the industry which in turn will benefit the home buyers at large.”

According to ICICI Securities, with reduced cost of premiums, a developer can look to pay the entire approval cost upfront and potentially launch a new project at an attractive price owing to cost savings. This will drive higher bookings during the initial launch of a project.

While premiums vary based on location, ready reckoner rate, approval costs and project layout, they broadly account for close to 18 per cent of the project cost for a mid-income housing project in Mumbai, said domestic brokerage JMFL.

Developers with significant Mumbai exposure including Oberoi Realty, Godrej Properties, Phoenix Mills, Prestige Estates and Sunteck Realty stand to benefit, said ICICI Securities.

“Going forward, we expect supply side to also pick-up following the cut in premiums and transaction volumes to remain at an elevated level,” JMFL further said.

According to ICICI Securities, while clarity is awaited on the conditions where a developer pays stamp duty on behalf of the buyer, the spurt in property registrations in Mumbai during the October-December 2020 period owing to the stamp duty waiver of 3 per cent bear testimony to the potential benefits of the concessions.

Published on January 07, 2021

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