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Dark night for realty sector, light still seems elusive

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demonetisation-Real-Estate

Mumbai, Oct 27 : It was a year when India’s realty sector was shaken to its foundation. A majority of the big, medium and small realtors across the country suffered from a severe liquidity crunch, stalled projects, elusive investors and buyers and a near-blanket stay on new projects — especially in the lucrative commercial and luxury housing segments.

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How did demonetisation result in such a severe impact on this segment?

“Essentially, demonetisation completely drained the markets of liquidity, which is still continuing. Banks have all the money but it is not being lent out. Nor is it adequately compensated by alternatives like digital growth,” Niranjan Hiranandani, leading developer and Chairman of Hiranandani Constructions, told IANS.

Hiranandani, who is also President of the National Real Estate Development Council (NAREDCO), a powerful body of construction companies, admits that the realty sector took “a battering” at close quarters in the past 12 months. The high-investment construction industry was the worst affected.

The Goods and Services Tax (GST) and the Real Estate Regulation Act (RERA) have not helped either. If anything, they have come in as additional dampeners. The result is that the realty industry is passing through a phase where it seems to be all decked up and having to go somewhere.

Hiranandani said that, on an average, around one-third of the realty market was down nationwide, with the impact even higher in the north and the east, even as the cash crunch continues. The realty sector operated on the basis of unaccounted wealth, which may have taken a hit.

Also, the sector was largely unregulated, allowing builders to delay projects at their whim, and investing money raised from customers in other projects or land banks. RERA is expected to change all that, with strict penalties for violation of construction norms or fund use.

Jaxay Shah, President of the Confederation of Real Estate Developers Association of India (CREDAI), is quite upbeat about the changes that have spelled doom for the sector he is in. “Some of the most revolutionary reforms such as demonetisation, RERA and GST have proved to be a ‘naya daur’ or a new era for the realty sector,” said Shah, who is Managing Director of the Gujarat-based Savvy Infrastructure.

Shah told IANS that the policy and legislative changes were “ushering in a new wave of growth” by increasing transparency as well as home-buyer and investor confidence. “These will eventually help in a sustainable growth of the sector and the economy.”

Only agreeing partly, Hiranandani said there were some bright spots, even though most real estate markets were down. “The situation is bright in pockets; for instance, our Group sold the highest number of units in commercial properties in our career,” he said with a smile.

But he added that very few groups — like his own — managed to scrape through after the initial shocks which hit the economy like a ‘tsunami’.

Those representing the buyers fail to see bright spots in the sector.

Ravi sharma, National Secretary of the Confederation of Real Estate Brokers Associations of India (CREBAI), said while there was a more than 25 per cent drop in new property sales, the secondary or resale market saw a collapse of nearly 50 per cent, mainly because buyer confidence was rudely shaken.

“This has created a change in the level of buying. For instance, the middle-class is now opting for affordable housing, which was earlier being bought by lower-middle classes families. The luxury housing segment has practically crashed in Maharashtra, Tamil Nadu, Kerala, Karnataka, Telangana, Andhra Pradesh, NCR and other major markets,” Sharma told IANS, adding that the situation was likely to become worse in the coming months.

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Already, he said, there were market rumours that cash component in deals was making a comeback in substantial proportion as many cash-starved builders and developers were desperate to meet their commitments in the face of new regulations.

Although there’s a substantial drop in interest rates for housing, this has attracted only a small segment of investors (not buyers). He feels that potential buyers with spare resources were now diverting to the stock markets for better returns.

Sharma said the chances of a turnaround were low. Most developers were saddled with up to one-third in unsold stocks, blocking up huge investments. With nearly a 40 per cent drop in sales in the largest market like Mumbai, almost all the builders were facing a severe financial crunch. Many are thinking of shifting to low-cost housing and to construction in tier-3 cities.

He said buyers were looking for reduced rates and some developers were trying to dispose of their unsold inventory with discount. “But how long can this go on?” Sharma asked rhetorically.

Hiranandani says a silver lining is visible, but many problems need to be sorted out.

“For instance, many foreign investors who are keen to enter are waiting for the right time — GDP is down and the economy is not picking up, despite measures by the government. Once these are tackled, investor and consumer confidence would revive.”

Shah is confident that sentiments in the sector are reviving.

“The provisions designed to protect buyers — whose interests are at the heart of the reforms — are helping to streamline processes and facilitate a transparent ecosystem for all. We are witnessing an overall recovery of the sector,” Shah said.

That may be a tad over-optimistic, but every stakeholder in the sector may be looking out for the light at the end of what seems a long, dark tunnel.

BY : Quaid Najmi

(Quaid Najmi can be reached at [email protected])

(Editors: The above article is part of a series of demonetisation stories leading up to November 8)

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Key Indian equity indices open flat

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SENSEX-

Mumbai, June 18: The key Indian equity indices on Monday opened on a flat note.

The 30-scrip Sensitive Index (Sensex), was trading 17.56 points or 0.05 per cent lower soon after opening.

The wider 50-scrip Nifty of the National Stock Exchange (NSE) was also trading 7.60 points or 0.07 per cent lower at 10,810.10 points.

The Sensex of the BSE, which opened atA35,698.43 points, was trading at 35,604.58 points (at 9.19 a.m.), lower 17.56 points or 0.05 per cent from the previous day’s close at 35,622.14 points.

The Sensex touched a high of 35,721.55 points and a low of 35,585.73 points in the trade so far.

IANS

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Market Review: Higher industrial output, Kim-Trump meet lift equity indices

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Sensex Nifty Equity

Mumbai, June 16: Healthy industrial production data and an encouraging geo-political scenario aided the key Indian equity indices to rise for the fourth consecutive week.

The gains in the week ended Friday, however, were limited by a number of global factors including the interest rate hike in the US, and US President Donald Trump’s approval to tariffs on $50 billion of Chinese exports.

Additionally, domestic factors such as a rise in retail and wholesale inflation also arrested the gains.

Index-wise, the barometer 30-scrip Sensitive Index (Sensex) of the BSE rose by 178.47 points or 0.50 per cent to close at 35,622.14 points on a weekly basis.

The wider Nifty50 of the NSE closed the week’s trade at 10,817.70 points — up 50.05 points or 0.46 per cent — from its previous close.

According to analysts, market breadth was positive in only two of the five trading sessions.

“Markets ended the week with modest gains after a sharp bounce back from the lows of 10,755 points (Nifty50),” said Deepak Jasani, Head of Retail Research at HDFC Securities.

Hem Securities’ Director Prateek Jain said: “Last week indices extended their winning streak to the fourth consecutive week. The upswing was seen despite retail inflation rising to 4.9 per cent for the month of May compared to the previous month.”

According to Rahul Sharma, Senior Research Analyst at Equity99, “It was an eventful week on the global front too, with US President Donald Trump and North Korean leader Kim Jong Un signing a joint agreement for the denuclearisation of the Korean Peninsula.”

“Further, the Fed (US Federal Reserve) has again done what it was expected to do as it raised benchmark interest rates hinting at a little more aggression in tightening monetary policy this year,” Sharma said.

“Another event, which kept investors sentiments on the toe was reports that President Donald Trump’s administration has cleared tariffs on tens of billions of dollars’ worth of Chinese goods”

On the currency front, the rupee closed at 68.02 against the US dollar depreciating by 51 paise from its previous week’s close of 67.51 per greenback.

In terms of investments, provisional figures from the stock exchanges showed that foreign institutional investors sold scrip worth Rs 5,294 crore, while the domestic institutional investors purchased stocks worth Rs 4,014.25 crore during the week.

Figures from the National Securities Depository (NSDL) revealed that foreign portfolio investors (FPIs) divested equities worth Rs 3,071.85 crore, or $455.4 million, in the week ended on June 15.

Sectorally, the top gainers were the pharma, IT, energy and PSU bank indices and the top losers were metal, infrastructure and realty indices, Jasani told IANS.

The top weekly Sensex gainers were Dr Reddy’s Lab (up 13.97 per cent at Rs 2,351.10); Sun Pharma (up 8.11 per cent at Rs 571.05); Tata Consultancy Services (up 5.33 per cent at Rs 1,841.45); IndusInd Bank (up 4.01 per cent at Rs 1,965.85); and Reliance Industries (up 3.10 per cent at Rs 1,013.85 per share).

The major losers were Tata Steel (down 5.60 per cent at Rs 565.95); ONGC (down 4.64 per cent at Rs 165.45); Coal India (down 3.74 per cent at Rs 279.05); NTPC (down 3.40 per cent at Rs 156.05); and Tata Motors (DVR) (down 3.30 per cent at Rs 180.05 per share).

IANS

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Despite overflowing godowns, Modi Govt allows pulses import

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Pulse price rise

New Delhi, June 16: Despite overflowing godowns, the central government has allotted quotas for import of pulses and is enforcing an additional import agreement with Mozambique.

The development comes at a time when domestic stocks are at their peak, domestic production is expected to be high and prices are reducing.

According to the Hindu report, Farmers and millers are unhappy with the situation, but the government says it is balancing the needs of Indian consumers and commitments to foreign trade partners on the one hand and the interests of Indian peasants on the other.

On the related note, the Directorate-General of Foreign Trade (DGFT) held a meeting on Monday, during which the final allocations of import quotas — totalling two lakh tonnes of tur or arhar dal, and 1.5 lakh tonnes each of moong and urad — were made.

Those amounts show a quantitative restriction that was imposed on pulses imports in August last year in response to a glut in domestic supply and decreasing prices, which continues this year.

“The government has stock, traders have stock, millers have stock, and farmers have stock, so there is a surplus. We don’t understand why the government is insisting on import…we may be able to meet only 40-50% of our quotas”. A senior official at the DGFT insisted that according to the terms of the allocation, import quotas must be met by August end.

As a good monsoon forecast is expected, the Agriculture Commissioner predicts domestic pulses production of 24 million tonnes in 2018-19.

However, earlier in May,  the DGFT issued a notice exempting pulses imports from Mozambique from the restrictions.

WeForNews

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