Thaindian News

New Delhi, July 10 (IANS) Realty stocks may have staged a minor recovery in the past few weeks but the sentiment remains weak due to continuing disputes over land acquisitions, hikes in interest rates and the apex bank’s caution on exposures to developers.

The realty index of the Bombay Stock Exchange (BSE), a representative index of 15 firms in the business, is down nearly 30 percent over the past year, even if it is ruling 4.5 percent higher over the past month.

In contrast, the benchmark 30-share sensitive index (Sensex) of the exchange is up over 7.5 percent over the past year and 3.35 percent over the past month, even managing to scale the crucial 19,000-point mark during the week ended Friday.

“Real estate stocks have not been a favourite for quite some time now,” said Jagannadham Thunuguntla, strategist and head of research, SMC Global Securities, a leading brokerage and advisory.

“Lack of transparency both in the government regulations and in the manner in which some companies are functioning and heavy financial costs of developers have just added to the gloom surrounding these stocks,” Thunuguntla told IANS.

One of the reasons for the poor show of realty index may be that over 45 percent of the weight has been assigned to DLF and Unitech, both of which have their dominant market presence in the north, notably around the national capital.

The latest ruling by the Supreme Court, which upheld an earlier ruling by a lower court quashing the acquisition of some farmland in Greater Noida for housing projects, shook the sentiments even further.

How have some of the stocks performed?

* DLF, which logged a 52-week high of Rs. 397.35 on Oct 10 last year, closed at Rs.236.85 Friday, after falling to a low of Rs.206.55 June 11.

* Unitech, which logged a 52-week high of Rs.98.45 on Oct 7 last year, closed at Rs.36.55 Friday, after falling to a low of Rs.28 on June 11.

* Sobha Developers, which logged a 52-week high of Rs.403.90 on Oct 4 last year, closed at Rs.285 Friday, after falling to a low of Rs.185 on Feb 11.

Neeraj Bansal, director with global advisory firm KPMG, says investments in real estate firms and properties could get stifled, especially in the regions where land has been acquired despite reservations by the owners.

Banks too would be hesitant in financing such real estate projects, Bansal said.

“Financing projects in the area would be a bit difficult now as the collateral, which is the property itself, is in jeopardy. Banks have also slowed down the processing of loans for that region.”

(James Jose can be reached at james.jose@ians.in and biz@ians.in)