INSUBCONTINENT EXCLUSIVE:
Ground reports are finally signalling green for this sector, which has probably seen longest slump for any industry in Indian economy.
For a
never-ending 10 years now, stocks from this sector has been eroding investor wealth! Realty stocks have been buzzing on Dalal Street past
few days, and a 3 per cent rise in BSE realty index in first week of New Year against a flat Sensex suggests investor confidence is
returning.
Market experts are finally sounding optimistic on real estate sector and believe news about a slow uptick in sales or a steady
fall inventories in select markets should help some these stocks look up.
The BSE Realty index slumped 25 per cent between January 2009 and
January 2019, whereas indices representing other key sectors of economy such as consumer durables, auto, banking, capital goods, IT, FMCG,
healthcare, metal, and oil gas have surged between 120 per cent and 960 per cent in same period
With a gain of just 5 per cent, even power index has managed to remain in green despite many recent headwinds.
Realty is a key sector of
process of getting cleaned up
Many real estate companies are trading at decent discounts to their net asset values
Higher inventory is only concern now
ETNow.
Despite its underperformance as a sector, shares of companies like Eldeco Housing Industries, Poddar Housing, Ashiana Housing,
Ahuluwalia Contracts, Kolte Patil and Phoenix Mills have surged between 600 per cent and 2,700 per cent in last 10 years
But others like Unitech, Parsvnath Developers, Ansal Properties, Anant Raj, Peninsula Land and DLF slipped between 40 per cent and 95 per
cent.
Analysts are advising investors to zero in on companies that are getting rental incomes
rental incomes, for instance Oberoi Realty or DLF, because that would give a certain amount of stability to earnings
Brokerage firm Nirmal Bang Securities said weak sales together with rising cost pressure got be compounded by negative news flow arising
from implementation of Real Estate (Regulatory and Development) Act or RERA and Insolvency Bankruptcy Code.
It says challenges are not over
The sector is currently grappling with issues like liquidity deficit, high cost of capital, below-par sales and a string of stalled projects
However, high demand and lower additions in commercial and retail space have led to tightening of vacancy rates and increase in lease
We have a negative view on residential segment, but positive view on rental portfolios of Prestige Estates Projects, Nesco, Brigade
Latest data shows volumes have declined 35 per cent in Mumbai, 60 per cent in Gurugram and 20 per cent in Bengaluru.
The price decline has
been sharpest in Gurugram at 20-25 per cent (in some localities it has been 35-40 per cent)
In Mumbai too, prices continue to be under pressure.
Going forward, combined impact of a slowing economy and regulatory changes in
residential real estate segment could lead to 10-15 per cent prices drops in Mumbai and by 20 per cent in Bengaluru, says analysts.
Nirmal
The stock traded at Rs 454 on Wednesday.
Abhishek Anand, Vice President for Institutional Equity Research at JM Financial Institutional
Securities, said importance of real estate sector is well acknowledged by central and state governments and introduction of affordable or
mid-income and rural housing schemes are aimed at improving real estate activity
wealth on Dalal Street with shares of Ratnabhumi Developers rallying 63 per cent, followed by Navkar Builder (up 59 per cent) and Ishaan
Infrastructures and Shelters (up 43 per cent)
On other hand, companies like Sunstar Reatlty, SRS Real Infrastructure, Jaypee Infratech, Unitech and Parsvnath Developers plunged over 75
per cent during year gone by
