Realty stocks ran out of investor’s favour on Wednesday with the sectoral index tanking by over three per cent on the bourses. On the NSE, the CNX Realty index closed 3.40 per cent down from its previous close, while the BSE realty too ended the day down 3.08 per cent, dragging down the broader Nifty and Sensex as well.

The worst hit stocks were Indiabulls Real Estate followed by DLF which closed at Rs 44 (down 5.17 per cent) and Rs 190.30 (down 5.16 per cent) respectively on the NSE.

F&O effect

According to market watchers, undecided fate of the Land Acquisition Bill as well as the unwinding owing impending expiry (on Thursday) of F&O contracts had a negative impact on the investor sentiment among other overhangs.

Realty sector has continued to remain in the doldrums in the recent past with low off-take owing to factors such as high prices and interest rates as well as rising debt amidst a marked slow down in volumes.

Recent developments including the confusion over payment of the proposed retrospective VAT to the Maharashtra Government and the Finance Minister’s statement pressurising banks to push developers to sell their unsold inventory at lowered prices has also not augured well for the sector’s prospects.

Host of issues

Chairman of Real estate consultancy firm Knight Frank, Pranay Vakil, said: “Realty stocks have been depressed as there is lack of consistency and clarity from the Government on a host of important issues such as the Land Acquisition Bill and the VAT in Maharashtra. These are avoidable complications leading to confusion and uncertainty in the minds of the investor.”

“Even if the Land Acquisition Bill sails through, there is confusion among developers regarding the Bill provisions which stipulate that the developers have to look after the people existing on the land over a period of 20 years in terms of giving them employment. Developers do not want to be burdened with such a tedious compensation.”

>manisha.jha@thehindu.co.in

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