The Hindu Business Line : Realty stocks hit badly despite RBI’s revival measures

Mumbai, Nov. 17 Despite the Reserve Bank of India announcing steps to make available more funds for the real estate sector, the realty index on Monday was the worst hit among the BSE sectoral indices.

The index ended with a fall of 5.17 per cent and during intra-day trade, it was quoting down by 10 per cent.

Late on Saturday, RBI reduced the risk weights for exposure to commercial real estate from 150 per cent to 100 per cent and also provisioned requirements for housing loans in excess of Rs 20 lakh from 1 per cent to 0.4 per cent.

This may not actually translate into increased lending to this sector, said analysts and market-men.

Although the central bank is trying to encourage lending to the real estate sector, “the banks are expected to continue to err on side of caution,” a BNP Paribas Securities report issued on Monday said.

“The move permitting housing finance companies to raise short-term foreign currency debt does seem difficult given the current market conditions,” said Ms Rohini Malkani, Economist, Citi India.

She added that though the move would definitely have a positive impact on the sector, it had limited immediate effect.

Stock play

All the stocks in the BSE Realty index declined on Monday.

DLF and Housing Development Finance Corporation were among the top losers of the day in the Sensex pack.

DLF dipped 3.9 per cent to close at Rs 231.45 and HDFC closed down 3.8 per cent at Rs 1498.3.

Anant Raj Industries dipped 8.37 per cent, Ansal Properties lost 6.35 per cent, Indiabulls Real Estate declined 7.54 per cent, Sobha Developers came down 9.23 per cent and Unitech slid 6.45 per cent.

Bleak Outlook

The outlook for the real estate sector remains rather bleak for at least a quarter or two, said analysts.

Sales have almost completely dried up; unless real estate prices decline volumes will not pick up, said Mr Shailesh Kanani, a real estate analyst with Angel Broking.

“One can expect a further (share) price erosion of another 30 per cent to 40 per cent in the next two quarters,” he added.

“Elevated affordability levels indicate price corrections are inevitable and we maintain our negative call on the sector,” stated the BNP Paribas report.

Highs and lows

The realty stocks were among the frontrunners during the last bull rally. In the current bear rally they are among the worst hit.

The share prices of most of the realty stocks are trading below their IPO prices.

In the last week, the realty index has declined more than 22 per cent and in the past month it dipped 25 per cent. From its all-time high of January this year, the index has shed more than 86 per cent till date.

More Stories on : Real Estate & Construction | Stocks

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page