Realty stocks biggest losers

MUMBAI: Realty stocks have eroded nearly 25%, the most among sectoral indices, since the correction in the Indian stock market started in late August. The change of stance on interest rates and tightening liquidity for non-banking finance companies (NBFCS) hit the sector, which had just started seeing a recovery.

While the BSE’S 30-share benchmark index, the Sensex, dropped 10.58% since 28 August, the BSE Realty Index eroded 24.55% of its value.

In fact, all the 10 components of the BSE Realty Index have lost value since then.

Indiabulls Real Estate Ltd fell the most, declining 41.29%. Sunteck Realty Ltd, Housing Development and Infrastructure Ltd and DLF Ltd fell 32.11%, 29.57% and 32.28%, respectively.

For the year-to-date, the four stocks eroded 62.48%, 16.80%, 69.08% and 44.30%, respectively.

“Lending is squeezed due to liquidity concerns. Rates have also shot up,” said Dhananjay Sinha, head of research at Emkay Global Financial Services Limited.

The panic led to a steep correction in other NBFCS, even as the problems for these other companies was due to a liquidity crunch. The concerns were echoed by others in the NBFC space, too.

“There is a question mark on whether there is enough capital available from housing finance companies because of which there is a negative outlook on development companies,” said Amit Goenka, founder and chief executive officer, Nisus Finance Services Co. (Nifco), which has an NBFC arm.

On the project financing front as well, there will be delay in financial closure and refinancing of projects.

While earlier commitments were being honoured, new projects and new financing were becoming slightly challenging.

“There will be overall slowdown in terms of growth in the real estate market. We are only left with two quarters and these are peak quarters for the sector. Sometimes 65-70% of the sales happen in these two quarters. Liquidity issue among NBFCS is going to significantly impact growth,” said Goenka.