The worst affected sector in this scenario is the already dangling real estate sector with the BSE Realty Index witnessing a huge bout of volatility on Thursday post the announcement. The Realty index, being the worst sector performer on BSE, fell by over 5% in afternoon trade only to bounce back with the reversal of the market with the positive numbers of IIP.
India's second largest real estate developer by market capitalisation Unitech fell 5.02% at Rs 175.10. It hit a 52-week low of Rs 172.30 in early trade.
Ansal Properties & Infrastructure fell 4.52% at Rs 96.05. It hit a 52-week low of Rs 95 in early trade.
Parsvnath Developers fell 3.80% at Rs 163.10. It hit a 52-week low of Rs 160.35 in early trade.
Housing Development and Infrastructure (HDIL) (down 6.58% at Rs 538.90), DLF (down 6.32% at Rs 478.90), Omaxe (down 3.92% at Rs 172.60), and Indiabulls Real Estate (down 3.78% at Rs 366.50), slumped.Expectations are that home loan rates are going to move up further. Real estate sector is highly sensitive to interest rates as the cost of holding for both the builder and property buyer moves in tandem with the changing interest rates. The mismatch in pricing for buyers and sellers is the most critical issue for the real estate companies.
With India's inflation soaring to a 7 year high of 8.75%, we are not seeing the last hikes in repo rates, CRRs, reverse repo rates by RBI, giving red signals to the real estate sector.
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For all the talk about a slowdown in the economy, real estate prices in most parts of the country have not corrected as much as most prospective buyers would have liked them to. But, shares of most real estate companies are not finding any takers even after falling nearly 50% from their record highs in January this year. This would suggest that the ongoing sell-off in real estate stocks is a good opportunity for bargain hunting. Yet, most brokerage houses are advising their clients against doing so, as they foresee testing times for the sector in the near term. In fact, many of them are recommending that existing investors cut their losses right away as they could be in for a long wait for share prices to come anywhere near their lofty highs.T he sharp rise in real estate prices, coupled with high borrowing costs has let to softening of demand. The slump in the stock market, too, has contributed to the trend as many investors were earlier routing their gains in share trading into real estate.Industry experts feel that companies that have managed to buy land in Mumbai at reasonable rates could be good bets even in these turbulent times. With outlook on the market as a whole being bearish, brokers expect realty stocks to slip further.Most property developers in India were riding the wave of an unprecedented demand due to a combination of rising affluence, tax benefits for home owners and low interest rates. But, this fuelled speculative buying in the sector, causing property prices to soar to exorbitant levels.For more view- http://realtydigest.blogspot.com/
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