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In past two months, the realty stocks have outperformed the market by wide margin. Since March 2014, the S&P BSE Realty index had rallied 22.5% against 6.4% rise in benchmark S&P BSE Sensex till yesterday.
Among individual stocks, DLF, Unitech, Anant Raj Industries, Housing Development and Infrastructure (HDIL), Indiabulls Real Estate, DB Realty, Oberoi Realty and Prestige Estates were among the top losers that lost between 3-9% on the Bombay Stock Exchange (BSE).
Vaibhav Sanghavi, director (equities) at Ambit Investment Advisors attributes the fall to profit booking since the stocks had seen a healthy run up.
"Going ahead, one needs to exercise caution. A rational view suggests that one should take an investment call in these stocks post the election outcome rather than taking the plunge now. The markets are already factoring in a positive poll outcome to some extent," he says.
Adds Daljeet S Kohli - Head of Research IndiaNivesh Securities: "There is no specific news-driven development for the sector that has seen the stocks from this space crack. The market seems to be in weak hands. It seems that investors are either booking profit or reducing exposure ahead of the poll outcome. We have had a negative view on the real estate space since a long time. However, there are specific stocks such as Nesco, Phoenix Mills and Oberoi Realty that we like."
As regards Indiabulls Real Estate (IBREL), Sandipan Pal, an analyst tracking the sector with Motilal Oswal feels that strong visibility of cash flow from sold assets and gradual recovery in market sentiment render significant comfort over liquidity, earnings growth and robust payout. They maintain a buy recommendation on the counter.
Fundamental view
According to reports, the sales volume of 25 listed real estate companies have almost halved from 21.85 million sq ft to 11.80 million sq ft, which is almost 43% over the past eight quarters. Delay in approvals, high cost of funds and slow uptick in the sales volume dried up the liquidity for the cash-starved real estate companies, which in turn, log jammed the construction activity across India.
| 29/04/2014 * | 30/04/2014 * | Chg (%) | |
| DLF | 153.55 | 140.25 | -8.66 |
| Unitech | 17.30 | 15.85 | -8.38 |
| HDIL | 73.80 | 68.50 | -7.18 |
| Anant Raj | 58.50 | 55.20 | -5.64 |
| Indiabulls Real Estate | 65.50 | 62.35 | -4.81 |
| Data compiled by BS Research | |||
| * Stock Price on BSE in Rs | |||
Going ahead, experts suggest that the overall sentiment should get a boost once a stable government assumes charge at the centre. However, the government has its work cut out as regards this sector that awaits the passage of the Real Estate Regulatory Bill.
"Like most other business sectors, the Indian real estate market holds its breath for a stronger and more determined government. The perception which is currently driving market sentiments is that market momentum can either accelerate, remain unchanged or decelerate depending on which party is voted into power," points out Anuj Puri, chairman and country Head, JLL India.
"The industry expects the new ruling government to be less dependent on smaller coalition parties for support; a clear electoral mandate will help real estate investors to obtain clarity on future policies, which is critical while making future business plans; REITs to become operational in India so as to increase liquidity; and approval and implementation of the pending Real Estate Regulatory Bill," he adds.
Findings of FICCI Knight Frank Real Estate Sentiment Index survey suggest the current as well as future sentiment depict a significant upward trend.
"Real estate stakeholders are markedly bullish about the future and expect the business environment to be upbeat in the coming six months as election polls point towards an imminent change in regime. Both developers and financial institutions expect the real estate sector to perform much better in the coming six months. Financial institutions' view of the future has also strengthened considerably," the findings suggest.
