The real estate market is feeling the heat following the government’s decision to phase out Rs 500 and Rs 1000 notes with shares of leading realty companies like DLF, Unitech, Godrej Properties, Indiabulls Real Estate, Sobha, Oberoi , HDIL and Unitech crashing by 10% to 20%.
This trend is indicative of the fact that the sector will be under tremendous pressure in the short term - four to six months. “Since many real estate stock investors have started selling, there has been a fall in share prices but this is a short term phenomenon,” said Samantak Das, chief economist and national director - research, Knight Frank (India) Pvt. Ltd.
“High investor-driven markets, NCR and Mumbai and high-ticket size units will feel the pressure of sales in the near-term. It will also affect transactions in the short-term, which in entities with high leverage could add pressure,” said Samar Sarda of Kotak Institutional Equities.
While there will not be high impact on end-user dominated markets and their product offerings, transactions in Tier 2 and small towns will be impacted in the near term the most as the ‘use of cash’ transactions is higher in such markets, a note on the impact, a Kotak Institutional Equities Research paper said.
It also said that a likely correction in real estate prices will put pressure on the financial position and prospects of real estate developers. Transactions of land will also reduce. As such, land banks of developers (which may be a security for these loans), may also be reckoned illiquid and that could put a fair bit of pressure in the system, the paper said.
There will also be concerns on housing finance demand. The likely stress on developers may translate into correction in prices in select markets, in turn putting pressure on demand. “We should ideally expect transactions to start growing as consumers are a lot more comfortable as the price finds its bottom in many markets,” it said.
Indiabulls Real Estate down 21% at Rs 63.45
DLF down 20% at Rs 114.50
HDIL down 20% at Rs 59.60
Oberoi Realty down 13% at Rs 293.85
Unitech down 12% at Rs 5.01
Prestige down 11% at Rs 163
Sobha Ltd down 8% at Rs 249
NBCC down 6% at Rs 220.
Godrej Properties down 3.2% at Rs 347
Omaxe down 3% at Rs 161.60