Stocks of real estate companies and NBFCs rise


Mumbai: Shares of non-banking finance companies and real estate players gained on Thursday after finance minister Nirmala Sitharaman announced an alternate investment fund (AIF) to help the real estate sector finish pending housing projects. Analysts said gains would be capped as the package may not be enough to put an end to the woes of NBFCs and real estate companies.

Among NBFCs, Indiabulls Housing, Edelweiss, Shriram Transport and Bajaj Finance gained 1-9 per cent while the Nifty Realty index gained nearly 1 per cent to end at 276.45 points. Indiabulls Real Estate, Phoenix Ltd, Sobha and Prestige Estates Projects gained 1-5 per cent.

“The announcements will boost sentiment and provide relief to the beleaguered real estate sector that has been hit by the multiple head winds of demonetization, GST and RERA (Real Estate Regulation Act) in quick succession,” said Kotak Institutional Equities in a note.

The government will infuse Rs 10,000 crore in this fund while SBI, LIC and other sovereign funds will add to this fund to take it to Rs 25000 crore and beyond. The Finance Minister said projects declared NPA or those not declared liquidation worthy by NCLT will also benefit from this move. These announcements are likely to boost sentiment to the beleagured real estate sector which has been hit by several headwinds in recent years.

“NBFCs which have lent money to real estate players who are in the last stage of projects. For them, asset quality will improve and provisioning will come down,” said Deepak Jasani, Head of Retail Research at HDFC Securities. “For NBFCs the gains in stock prices is more of a relief rally. They still face issues with other sectors. Also, the ?25,000 crore-benefit may not be enough.”

Some in the market said the reaction in real estate stocks was relatively muted compared to the nature of the announcement as they see significant challenges in implementation of this move. Analysts also do not see any direct impact on listed developers as none of the related projects are stuck for want of liquidity.

The Nifty Realty index is the second best performing sector index on the NSE this year with a gain of 19 per cent. Godrej properties, Prestige Estates Projects, Brigade Enterprises, Sunteck Realty, Oberoi Realty and DLF are up 8-52 per cent so far in the current calendar year.