Land Bank BACK!

Realty and land bank play are words that are no longer an anathema in the capital market. In a complete volte-face , and less than two weeks since DLF’s listing, it appears that change is in the air. The recent past had seen the Delhi-based real estate company’s second attempt to tap the market meet with a muted response — the stock was listed with a small premium on its debut. Reason being the real estate tag. Land bank is once again the mantra and it comes as no surprise that most of the prominent real estate stocks are registering impressive gains almost on a daily basis. The real shot in the arm was, however, when BSE launched a separate real estate index — BSE Realty.

The index was launched on July 10 and since then it has gained more than 10%. In the same corresponding period, the benchmark Sensex gained a mere 3%. Stocks like DLF, Unitech, Parsvnath, Phoenix Mills, Sobha Developers and Indiabulls Real Estate have also moved up significantly in the recent past.

Among other things, the reason why interest in stocks is still alive is that real estate prices have not softened much, though the number of deals have come down. While small developers have been hit with the government and regulators cutting the fund flow to builders, large players still have a considerable staying power, thanks to huge profits they have made. Many small developers have sold their projects to big companies , but this inventory has not yet reached the market. This is holding the prices. Besides, demand is still high because genuine home buyers cannot endlessly postpone buying.

There has been a lot of buying by NRIs, who are comparatively less price-sensitive than local investors buying second and third homes. “Anyone who wants to be a part of the India growth story has to include real estate, as the growth rate in Tier II and Tier III cities is quite impressive ,” says KRIS Capital director Arun Kejriwal. DLF has gained close to 10% in the past one week. On Wednesday, it ended at Rs 645.40, up 5.78%, on the BSE.

Meanwhile, Indiabulls Real Estate gained more than 55% in the past one month and is currently trading at Rs 581.45. Sobha Developers has gained close to 12% in the past one month, Phoenix Mills was up 13.48% during the same period. Akruti Nirman has gained nearly 56% since June 18. “The best thing about other newly-listed real estate stocks is that they have plenty of room on the table and so investors have a good chance to make money,” feels Mr Kejriwal.

On a similar note, Arpit Agrawal, headresearch , Arihant Capital Markets, says that there is a global demand for Indian real estate sector. “Even if there is a correction in the prices, it won’t happen pan-India . It will be limited to certain cities,” he adds. Analysts are betting that the future will be volatile for bigger real estate players . “Once all real estate majors enter the derivatives segment, trading will become more volatile and, at the same time, exciting ,” says an analyst.