Realty stocks to face tough times: Citigroup

Global economic uncertainties have cast a shadow on India's realty market as property stocks declined by upto 46 per cent in the first quarter of this year.More challenges are on the cards, says Citigroup.

"Indian property stocks are down as much as 46 per cent in the past three months and have corrected 50-67 per cent from their highs in January this year, but we expect more volatility," Citigroup Global Markets said in its latest report.

India's property development story is structural, the markets remain tough because of rising inflation, a sharp fall in property transactions, stagnating prices and supply risks, the report added.

On December 31, 2007, the realty index of the Bombay Stock Exchange was quoted at 12,727.42 points and it tumbled to 7,554.80 points, a fall of 5,172.62 points or 40.6 per cent, as on March 31, 2008.

K P Singh-promoted DLF has suffered loss of Rs 427.30 in the January to March period, while Unitech lost Rs 212.10 during the period under review.

The other real estate biggies such as Indiabulls Real Estate fell by Rs 258.65, Housing Development and Finance Corporation shed Rs 488.70, Parsvnath Developers lost Rs 241.35 and Omaxe by Rs 365.55 in the first quarter of this calender year.

Citigroup said this decline can be largely attributed to the weakening global economy, sharp reduction in risk appetite and the uncertainty about appropriate valuations for property stocks in emerging markets including India.