Property stocks are stabilising after the steep fall under pressure from the consecutive interest rate hike, concerted credit squeeze and new land valuation norms imposed by the Securities and Exchange Board of India. “In the last ten days prices of real stocks have moved up though they are nowhere near their previous highs,” said Sapan Patel who runs BSE brokerage.
Stocks like Mahindra Gesco Developers and Unitech got a boost following the Government clearance of 83 SEZ’s last week. Gesco moved up from Rs 541 at the beginning of this month closed at Rs 620 on Friday. Sobha Developers bounced back from the low of Rs 620 it hit in March to close this week at Rs 820. Parsvnath too moved up to Rs 290.25 a substantial gain from its 52 week low of 221 the stock hit on March 7.
“Valuations of property stocks do look attractive after the correction, but any buy at present should only be long term,” warns Sandeep Memani, analyst at Emkay Share and Stock Brokers. Analysts are of the view that investors should wait till the new issues in the pipeline hit the market and for clear valuation benchmarks to emerge.
The lower inflation number for the week is another positive for the sector as analysts expect interest rates to come down by October-November if inflation continues to cool down following this week’s trend. “The sector has both negatives and positives loaded against and the price of the stock cannot be valued merely on the price to earnings ratio factor but on other qualitative factors,” explains a property analyst not willing to be quoted.
The market cap to NAV of listed companies has come down to 0.5 to 0.9 times from 1 to 1.3 it enjoyed a few months ago, points out Memani. He expects the valuation to catch up with the global ratio of 0.8 to 1.3 times. “Once interest rates come down stocks will move up to their old valuations,” he added.
Small players like Kamanwala Housing and Jai Corp, a metal company which is reportedly developing property have moved up, points out Patel. India Bulls Real Estate, the entity demerged from Indian Bulls Financial Services has also moved up by Rs 30 in a week to Rs 294.