Real estate stocks, already beset by rising interest rates, investor resistance on zooming property prices and rising input costs, closed in the red on the NSE on Tuesday after the RBI's rate hike announcement.
The increase was double the consensus expectation of 25 basis points.
While the realty index stocks, barring a few, were well ahead of their year's low, the ten rate hikes in over a year have already bled them and some have been battered for reasons other than performance such as some of their promoters being linked to the telecom spectrum controversy. Today's steeper-than-expected rate hike pushed them deeper into the negative territory.
Except Godrej Properties, the other nine stocks in the CNX Realty Index have witnessed a sharp negative change in the past 365 days, though except HDIL, rest of the realty index pack had rallied on the back of the broader market buoyancy during the past 30 days. The latest rate hike and the impact of it on the overall purchasing power of the people may put further strain on the realty sector.
In terms of percentage, the biggest losers in the CNX Realty index were DLF, Unitech, Anantraj and Sobha that lost 4.35 per cent to 4.87 per cent. The rest of the losers in the index were Parsvnath, Godrej Properties, DB Realty, Oberoi Realty, Orbitcorp and HDIL.
Of the stocks that make the realty index, only Godrej Properties' shares are in the green over a 365- day period with a gain of 25.64 per cent in price. The rest of the nine stocks have witnessed significant erosion in value with Parsvnath, DB Realty, HDIL, Orbit Corp and Unitech being the biggest losers with the loss ranging from 40.51 per cent in case of HDIL to 78.87 per cent in the case of DB Realty. But in the past 30 days, other than HDIL, rest of the pack has rallied with Anantraj registering the highest increase of 36.18 per cent.
Voicing the concern of the realty sector, Mr Pradeep Jain, Chairman, Parsvnath Developers Ltd and Chairman, Confederation of Real Estate Developers' Association of India (CREDAI), said that until steps were taken to improve supply system, the “increase by RBI is going to have a minimal effect on inflation.”
He drew attention to the fact that it was the 11th hike in last 17 months that rates have been increased and “it is evident to all that it has not been material in taming inflation to a desired level.” Instead he felt that if steps had been taken to “kick start production and manufacturing to support supply in market,” the impact would have been different.
He said while the industry was expecting a moderate hike of 25 bps, the increase by 50 bps was “going to dampen the growth.” Apart from making funds dearer to both developers and buyers, the “constant increases in the input costs” makes the business environment very complex across industries. Already the belt tightening has led to moderation in growth in Q1 of FY12 and across sectors there has been a slowdown.
Mr Pradeep Jain said: “As real estate developer, we are not left with any choice but to pass on the same to our buyers resulting increase in property prices.” He requested the RBI “not to increase the rate any further but stimulate measures for an improved supply chain management.”