Budget 2017 sops, RERA fire up realty stocks

Some experts, however, warned that RERA would only be beneficial for large listed developers

The Union Budget sops for affordable housing, expected increase in demand and the Real Estate (Regulation & Development) Act (RERA) has led to a surge in real estate stocks.

The BSE Realty Index has shot up eight per cent since the Budget. Besides giving affordable housing infrastructure status, the finance minister also increased the size of the houses which would fall under affordable housing for availing income tax benefits.

"Many developers are getting into affordable housing after the Budget. Besides the infrastructure status, the minister has also given other benefits which could reduce cost of apartments. This is expected to fuel demand for homes," said Ajay Jain, executive director at Centrum Investment Banking.

According infrastructure status means lower cost of funds for developers as it comes under priority sector lending, he added.

However, AK Prabhakar, head of research at IDBI Capital, said that the RERA would only be beneficial for big listed developers.

"RERA will put entry barrier for smaller developers but will help those with processes and systems," Prabhakar explained.

He also said that demand has not increased for residential units.

Home sales across top nine cities of the country declined by 20 per cent in Q3 FY’17 compared with a four per cent fall in the previous quarter, said a new study. In absolute terms, sales shrunk from 54,721 units in Q2 FY’17 to 43,512 units in Q3 FY’17.

The pace of decline witnessed during the quarter is the highest in the past 12 quarters, said PropTiger’s ‘Realty Decoded’ report for the October-December quarter of the financial year 2016-17.

The report further said that before demonetisation, the monthly average residential sales and launches during the July-October period were at around 19,000 units and 18,000 units, respectively; which were affected drastically on account of currency demonetisation.