Tuesday, May 19, 2009

Great News Demand OIf Real Estate on Rise Demand begins showing up in India again, say real estate firms

There is a surge in buying interest in all-inclusive ‘affordable’ flats being built for mid-income budgets
The BSE Realty Index surged the most on Monday as the Bombay Stock Exchange Sensex hit the upper circuit for the first time. The 14-stock index closed 23 per cent higher at 2,968.75, rising around 37 per cent over the last month.However, it is still around 63 per cent lower from last year (April 16, 2008). On Monday, the broader market index, Sensex, closed 17.34 per cent higher at 14,284.24 points. Analysts and firm officials are upbeat about the revival of the realty sector. They say if fundamentals such as credit market situation, interest rates and housing demand improve further, there can be a faster revival.“The real estate sector will see a revival faster than what was envisaged earlier. But the rise in stock prices, too, has been swift. The sector always lags behind the stock market in terms of time lines,” said Ambareesh Baliga, vice-president and research head at Karvy Stock Broking.“We can expect a revival in the real estate sector now because a lot of policy directives, including approval of external commercial borrowings, special economic zone status, FDI (foreign direct investment) in real estate, lower interest rates and overall availability of credit to the real estate sector, may happen,” said Amitabh Chakraborty, research head, Religare Securities.Real estate officials that Financial Chronicle spoke to are confident that the worst is behind them and that they are hoping to see better days ahead. “The market is likely to see fresh liquidity infused in the system after a prolonged downward swirl. The real estate index performance on Monday also suggests that the suitable time to make real estate purchase has arrived,” said Rajesh Vardhan, managing director, Vardhman Group.Rajeev Talwar, executive director, DLF, said a stable government is good for the revival of the real estate sector. “There is urgent requirement for urban housing reforms. There is humungous requirement for housing for people. Rules and regulations should not put more constraints on fresh supply hitting the market,” said Talwar. However, some analysts say Monday’s performance may not be sustainable in the long-term because the fundamentals of the real estate firms and the economy have not changed much.“Lot of shorts have built up in these companies and they are still not covered. Even their futures are trading at a discount. Hence, I think the companies are not going to have any immediate benefit (out of this market rally),” said Priyadarshi Srivastava, head of sales, IDBI Capital.

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