Realty firms shares on upswing, biggies gain

Written by Mona Mehta | Mumbai | Updated: May 20 2009, 05:05am hrs
Following the Sensex touching 14k mark, shares of major listed real estate companies gained at the Bombay Stock Exchange (BSE). While the shares of DLF Ltd gained 25% on the BSE to close at Rs 325 on Monday, shares of competitor Unitech Ltd gained 29.41% to close at Rs 66. Shares of Indiabulls Real Estate Ltd jumped 38.51% to close at Rs 205. Meanwhile, Orbit Corporation Ltd has also gained an altitude of 20% to close at Rs 104.45. The stocks of Puravankara Projects gained 9.36% on the BSE to close at Rs 69.50.

Ram Yadav, chief financial officer, Orbit Corporation told FE, The surge in our companys stocks is purely market-driven. The way real estate stocks are shaping in the last three to four months, we felt that the demand consolidation has started on lower rates and we are confident that the next nine to 12 months look positive for the real estate sector. There is a huge demand sitting in the sidelines which we feel will grow by 20% to 30% by July 2009. However, DLF and Unitech officials refused to comment on the market movement.

Prior to achieving gain in stocks this quarter, major real estate companies witnessed dip in growth rate of sales by 82% and net profit by 89% during the fourth quarter of the financial year 2008-09, as per the BSE Realty Index. Since the past two quarters, India's realty players have been facing a liquidity crunch as the cost of funding rose last year amidst the global credit squeeze, while home buyers shied away due to inflated valuations. New projects have since been put on the backburner while many of those under construction are delayed.

As for the rationale behind the recent surge in major real estate stocks, Anshuman Magazine, chairman and managing director, CB Richard Ellis, South Asia explains, One of the factors that has led to the surge in the stock market is the overall unexpected results of the elections which has had a positive impact on most of the stocks in the market including that of real estate. Besides this, the gain is also on the expectation from the government to ease the liquidity situation and accelerate investment into infrastructure. An improvement in customer confidence and consumption too will have a positive impact on real estate companies.

Ravi Ramu, director, Puravankara Projects agrees with the fact that the buying sentiments of customers are looking increasingly better. However, he refused to comment on stock surge.

There are other property consultants who also agree that stability is returning as a result of a clear political mandate. Shobhit Agarwal, joint MD, capital markets, Jones Lang LaSalle Meghraj (JLLM) opines, Without a doubt, both Saturday and Monday have been landmark events. It is evident that stability is returning as a result of a clear political mandate. Monday saw a resurgence of confidence in the Indian business community. This was clearly in short supply over the last three months, given the global economic events that were dictating sentiments over this period. From what we have seen, liquidity is increasing, and we fully expect a positive trickle-down effect on retail investors and home buyers."

Reflecting the triumph of the UPA in the general elections, the sentiments on Dalal Street were nothing less than euphoric with the Indian stockmarkets creating history by hitting a double upper circuit as investors scrambled for stocks. Says Dinesh Thakkar CMD Angel Broking said, The reason for this optimism is not difficult to fathom as with a clearer mandate, the UPA is on strong ground to carry out the reforms required that would push India towards the 10% growth trajectory over the next 5 years.