BSE Realty index climbs 9%; what's next?

Shares of real estate companies advanced up to 14% on Thursday after a domestic brokerage reported that Mumbai property registrations are expected to break the 10-year record. According to the report issued by a domestic brokerage, Mumbai residential real estate is on an upswing, as property registrations recorded in the first 21 days of September show that the numbers have crossed the levels seen in September 2018, and is expected to break the record of the last decade.

The report suggested that more than 6,000 units have been registered in the first 21 days of September, surpassing the September 2018 total of 5,913 units. It is expected to cross 7,000 units, a record in the last decade. The average daily registration in September was 300 units, up from 225 units in August.

Meanwhile, the Karnataka state assembly, on 20 September 2021, passed an amendment to the Stamp Act, 1957, under which the state has reduced the stamp duty on properties priced between Rs 35 lakhs and Rs 45 lakhs to 3% from the earlier 5%. The reduced rates are applicable only on registrations where the property is changing hands for the first time. This means buyers in the secondary market, also known as the resale market, will have to pay 5% stamp duty on property purchases, irrespective of their ticket size.

Reducing interest rates for home buyers ahead of the festive season is another key positive for the realty sector.

Housing finance major HDFC on 21 September 2021 announced a festive home loan offer at 6.70% interest rate, down from 6.75% earlier. The offer will be applicable to all new loan applications irrespective of the loan amount or employment category. The special rate is linked to the borrower’s credit score and the close-ended scheme will be valid till 31 October 2021.

The offer comes days after State Bank of India, Punjab National Bank, Bank of Baroda, and private lender Kotak Mahindra Bank announced benefits on home loans during the festival season.

The BSE Realty index closed 8.71% up at 3936.11. Oberoi Realty (up 13.60%), Godrej Properties (up 12%), DLF (up 9.33%), Sobha (up 8.44%), Prestige (up 6.03%), Sunteck (up 5.96%), Indiabulls Real Estate (up 5.68%), Brigade Enterprises (up 3.81%), Mahindra Lifespace (up 2.26%) and Phoenix (up 1.12%) advanced.

Godrej Properties on 22 September 2021 announced that it achieved sales of Rs 575 crore in a single day at the launch of the second phase of its project Godrej Woods in Noida (Uttar Pradesh). The realty developer announced that it has sold 340 homes with an area of more than half a million square feet on the first day of launch.

Mumbai-based Godrej Properties entered the NCR Market in 2010 and has until now added 17 projects across 5 cities with 6 projects having already been delivered.

Analysts view

Sharad Agrawal, executive director-capital markets, Knight Frank India said, “Indian real estate market is regaining the confidence of the global institutional investors. They see good opportunities in India across the capital stack on both the equity and debt side. Although India remains credit starved, the space left by the NBFCs is being filled by global credit funds who are becoming quite active in the country.”

“With the declining interest rates in India and cap rate compression, the interest rate gap between overseas and domestic market is narrowing which is opening newer avenues of investments. The long-term view on India is one of uptrend on commercial absorption on the back of increasing pace of vaccination, which will translate into a strong H2 of FY22. Residential is seeing a significant revival across markets on the back of favourable government policies, pent up demand of 18 months, attractive pricing, and lowest ever mortgage costs,” he added.

(With inputs from Capital Market – Live News)