Nifty Realty index hits lowest level since December 2016; DLF dips 5%

The real estate demand is expected to witness moderation and committed receivables from already booked sales can also get impacted, due to the Covid-19 pandemic

Shares of real estate companies were under pressure on Monday, with the Nifty Realty index hitting an over three-year low as the sector has been hit hard by the Covid-19 pandemic.

DLF, Prestige Estates Projects, Indiabulls Real Estate, Oberoi Realty, Mahindra Lifespace Developers, Brigade Enterprises and Sobha from the Nifty Realty index slipped in the range of 5 per cent to 10 per cent in intra-day trade on the National Stock Exchange (NSE). Of these, Mahindra Lifespace Developers, Brigade Enterprises and Prestige Estates Projects touched their respective 52-week lows.

At 01:17 pm, Nifty Realty index was down 4.6 per cent at 164.50 points, as compared to 2.8 per cent decline in the Nifty50 index. The realty index hit an intra-day low of 162.95, its lowest level since December 29, 2016.

DLF, the sector major, on Friday informed the stock exchange that credit rating firm ICRA has reaffirmed long term rating as 'A+' and that the outlook has been revised from positive to stable. There has been no change in the short term rating; it has been reaffirmed as A1. The stock dipped as much as 7 per cent to Rs 130 on the NSE in intra-day today.

The change in the outlook for DLF’s long-term rating follows the outbreak of coronavirus, with the ongoing pan India lockdown, contagion fears, and consequent economic uncertainties, which all are expected to impact the operations and cash flows of real estate developers. Demand is expected to witness moderation and committed receivables from already booked sales can also get impacted, given that mile-stone based payments may get deferred and some buyers may delay payments on account of economic uncertainties, ICRA said in rating rational.

Overall project cash flows are thus expected to get adversely impacted, resulting in a weakening of the credit risk profile of real estate developers and increased reliance on debt funding. However, DLF’s rating remains supported by available liquidity of around Rs. 2,000 crore in the form of cash and bank balances and undrawn bank lines, as well as proven refinancing ability. ICRA will continue to monitor the situation and the possible impact on the operating metrics and risk profile of the company, it said.

Meanwhile, according to CRISIL Research survey, cement dealers across the country expect a significant slackening in sales, elongated credit period to retailers, and higher working capital needs in the wake of the Covid-19 pandemic this fiscal.

As per study 70-80 per cent dealers felt individual home builders would delay new construction due to gloomy business outlook, fear of income loss, labour shortage, and uncertainty with respect to resumption of normalcy.