Realty stocks under pressure on liquidity concerns.

>> Friday, November 21, 2008

Despite the broadbased rally, realty stocks failed to pick up steam on Friday as investors resorted to heavy selling on sustained concers about availability of funds. Industry leaders Unitech and DLF continued to crumble. 

Market analysts said selling pressure went up after reports that DLF has postponed residential, commercial and hotel projects due to low demand. The real estate developer said it would terminate services of some of company's employees and stop working on some of its projects. Unitech and Parsvnath Developers also retrenched their staff last month in line as part of the cost cutting drive due to global meltdown. 

"Real estate is likely to underperform for the next 3-4 quarters. The interest rate for the realty firms as well as consumers has to come down to boost volumes. We estimate that the volumes won't go higher unless the prices correct by 30-40 per cent. But the builders are adament on the prices. However, according to the economic cycle, the prices have to go down because there is no affordability in the market," said Shailesh Kanani of Angel Broking. 

"Also, some builders expanded largely expecting the bull run to continue and bought land at exhorbitant rates and now are stuck in the change of economic cycle. We expect almost a 50 percent degrowth in the sector over the next 2-3 quarter," he added.

Rising borrowing costs, surging real estate prices and liquidity crunch ended the rally in the country's property market on the deepening global financial crisis. 

At noon, the BSE Realty Index fell 5.09 per cent with Unitech falling 10.53 per cent and DLF losing 4.24 per cent. Among other players, HDIL shed 5.88 per cent, Omaxe fell 4.44 per cent, Ansal Infrastructure was down 4.82 per cent. 

Meanwhile, Bombay Stock Exchange's Sensex rose 3.41 per cent or 288 points to 8,739.42 and National Stock Exchange's Nifty climbed 3.45 per cent or 88.1 points to 2641.25. - ET