DLF zooms

Industry leader DLF acted as a catalyst to boost the realty sector Wednesday, after the company bagged a $12 billion housing and commercial real estate project from the Karnataka government Tuesday.

The BSE Realty Index shot up nearly 7 per cent with DLF shares advancing 14 per cent.

The 9,187-acre Bidadi Knowledge City, which will be positioned as New Bangalore, is three times the size of DLF City, the realty firm's flagship integrated township in Gurgaon. The project will entail an investment of over Rs 60,000 crore and will be developed in 50:50 joint venture with the Dubai-based Limitless Holdings.

“DLF's market capitalisation, which stood at Rs 12,000 crore Monday, climbed to Rs 17,000 crore today on account of this mega deal. Karnataka government's decision of awarding this project to DLF spurred the stock, and in turn, had a sentimental rub-off on other stocks in the sector,” an analyst with Religare Securities said.

At 2:54 pm, DLF soared 13.85 per cent to Rs 873.15, Unitech was up 2.97 per cent at Rs 326, Akruti Nirman gained 9.29 per cent to Rs 776.10 and HDIL rose 1.39 per cent to Rs 647.

Unitech's inclusion in Nifty-50 on Friday will see further upmove for the sector.

On Sep 12, just news of the stock's entry into Nifty 50 was greeted with the BSE Realty Index gaining over 2.5 per cent.

Going forward, sky is the limit for the realty space. To hasten implementation of special economic zone projects, the commerce ministry has asked states to come up with a single-window clearance mechanism for SEZ project developers.

As a first step, the commerce ministry has convened a meeting of state governments of Maharashtra, Andhra Pradesh, Tamil Nadu, Gujarat, Haryana and Karnataka to review the progress of relevant SEZs that have received formal clearances. This augurs well for realty shares in the months to come.

Likewise, the Mumbai Metropolitan Region Development Authority has proposed to raise the floor space index for commercial properties in Bandra-Kurla Complex from 2 to 4.

"Currently, HDIL has a land bank of 1.1 million square feet in Bandra, while Satra Properties holds 3 lakh square feet. If MMRDA's proposal comes through, valuations of these companies are expected to rise," the brokerage said.

"HDIL with a target of Rs 694, Parsvnath Developers with a target of Rs 512 and Peninsula Land with a target of Rs 697 are our top picks in the sector," Religare added.

According to reports, the Indian Railways is planning to unlock value of its commercial real estate in three prime locations--Bandra (250 acres); Mumbai CST (250 acres); and Mumbai Central (250 acres)--in a phased manner. The Railways has a total land bank of 48,000 hectares across the country. Realty companies are expected to cash in on this news too.

While prices in Mumbai – both sale and rent rates – are likely to remain stagnant in the residential segment, prices on the commercial side are expected to rise for a year or so.

With the Dharavi redevelopment and the Mumbai airport expansion, demand and supply would be matched in the next 3-4 years. Prices in the commercial segment are expected to stabilise then.