Realty scrips up on land Act repeal

Real estate stocks spurted by 6 per cent as news of the Maharashtra Assembly's approval of the proposal to repeal the Urban Land Ceiling and Regulation Act (ULCRA) trickled in.

Mumbai-based realty companies such as HDIL (up 5.08 per cent to Rs 796.75 a share), Phoenix Mills (up 2.23 per cent to Rs 2273.05 a share) and Akruti City (up 4 per cent to Rs 1,155.2 a share) shot up as investors felt that more land would directly benefit the developers and there would be no dip in real estate prices. The BSE Realty Index shot up by 1.54 per cent or 154 points to end the day at 10,223.93 points.

"The scrapping of the Urban Land Ceiling Act has been perceived as an extremely positive step by the industry because this will lead to reduction in approval time and ease out the approval process. More transparency in the transaction will lead to the maturing of the market at a faster rate and will present more choices to the end user," said Joy Sanyal, head, strategic development initiative, Jones Lang Lasalle Meghraj.

"On the supply side, it will release additional land in Mumbai and parts of Maharashtra, but this land will not come into the market quickly and will only be released in small tranches by landlords. As a result, landlords may sell the land at a higher price, which will be further transferred to buyers. Thus, end users will not face reduction in the price," he added.

Godrej Industries that has the largest bank of property (in excess of 1,500 acres) shot up by 5 per cent or Rs 268.5. Other firms such as HDIL and Orbit Corporation (up 5.88 per cent to Rs 749.80).

Apart from the mainstream real estate companies, other stocks that rose were Century Textiles (up 2.05 per cent to Rs 1,128.80) and Wadias-owned Bombay Dyeing (up 3.06 per cent to Rs 688.15). Despite this move, industry observers feel that the upmove that certain stocks have witnessed is merely market speculation.

"Developers had factored in the time and cost required to clear projects. So this doesn't have major implications for the sector. It was waiting to happen," said a fund manager.