Realty stocks soar, present contrast to property market

DLF says any growth uptick will happen from second half of FY 2015

Though realty stocks have had a dream run on exchanges in the past month, physical property markets tell a different story. According to data gathered by realty research firm Prop Equity, in the quarter ended March this year, overall absorption of units fell by half in India’s top six cities. The number of launches, too, fell by half.

Fuelled by a rally in realty stocks, the BSE Realty Index rose 64 per cent in the past month. Experts say following the formation of a stable government at the Centre, a positive sentiment has driven the market.

Also, these stocks were largely beaten down in the past year and now, were seeing a recovery.

Through the next 18 months, the markets are expecting excess liquidity flow into this sector, says Amit Bhagat, chief executive and managing director of ASK Property Investment Advisors, a private equity fund manager.

Samir Jasuja, founder and chief executive, PropEquity, said, “Enquiries have gone up, but there is no major change as far as transactions are concerned. For things to pick up, it will take six months to a year.”

DLF, India’s largest developer, recorded sales of 3.75 million sq ft in 2013-14, against its target of 7.5 million sq ft. The company also missed its debt-reduction target; at the end of the March quarter, its debt stood at Rs 18,526 crore, against the targeted Rs 17,500 crore.

Ashutosh Limaye, head of research at Jones Lang LaSalle, said in the current quarter, sales have been in line with the quarterly average of 2013-14. “Unless developers are positive, why would they go for new launches?” he asks.

During a recent conference call with analysts, DLF said any growth uptick would only be seen in the second half of this financial year.

“With the sentiment improving, hiring will increase, jobs will grow and incomes will rise. This will increase affordability in a year and a half,” said ASK’s Bhagat.

“At that time, NBFCs (non-banking financial companies, foreign investors and banks will pump in money.”

Limaye believes if listed companies focus on constructing and delivering projects, rather than buying land, realty stocks could their good run in the markets. “Sales will pick up from the festive season, from the fourth quarter of this year,” he said.

Rajeev Talwar, executive director of DLF, said demand for properties had already picked up.