Friday, December 4, 2009

Indian Real Estate Stocks On High Despite Dubai Fiasco

. Friday, December 4, 2009

By stockOzone team

Indian realty stocks that bore the brunt of heavy selling last week following the Dubai debt crisis have, in fact, outperformed the broader market in the past one week. The BSE realty index has give a return 9.57% during the period compared to the BSE Sensex gain of just 1.96%. Even on a monthly basis, realty stocks have generated a higher return of 15.30% to Sensex gain of 11.56%.

Experts feel that the sentiment towards real estate sector has improved after lenders slashed their housing loan rates that are very positive for the industry. Further last four months of robust IIP numbers, along with better-than-expected GDP growth for the second quarter ending September 30, signifies the underlying strength in the domestic economy that augur well for the Indian real estate sector.

Shailesh Kanani, real estate analyst, Angel Stock Broking, said the main reason for realty stocks to go up is that the overall markets have gone up. “Moreover, bankers have reduced housing loan rates. HDFC has reduced housing loan rates to 8.5%, in line with SBI at 8.5%. This increases affordability and EMI goes down.” The DLF stock surged 8.37% or Rs 29.65 in the past week, while the stock of Unitech gained 16.43% during the same period.

“Currently, the stock market is exuberant and the residential real estate sector has started to look up as customers have come back to the market. Realty stocks grow and dip in line with the growth and dip in economy,” said Ambar Maheshwari, head, investment advisory, DTZ International Property Advisers. He said, “We are projecting the GDP to grow over 7%, which comes at a time when there is lot of disposable income in the market followed with lot of investments. As a result, people are buying more houses and corporates too are doing well. Real estate is a horizontal sector and almost all other sectors are vertical sectors. Realty stocks grow on the back of all the other sectors.”

Anand Narayanan, residential director, Knight Frank India Private Ltd, said, “The growth story in real estate is that Indian housing sector is broadly 10% of the Indian population, which has access to grade A office space. Since listed real estate companies have taken equity to clean up their books, their stocks look positive. Real estate stocks are seen moving in tandem with what was observed during the 2007-08 fiscal. In terms of sales, both residential and commercial sales can be better in line with 2007-08.”

The domestic equity market ended the day on a flat note following profit booking in key index heavyweights. The Sensex ended the day at 17,185.68 points, up 15.77 points or 0.09%, while the Nifty ended the day at 5,131.70 points, up 0.16% or 8.45 points

Disclosure: Author does not own any of the stocks discussed here.

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