Realty shares are among the worst hit this calendar year. There were some positive spells for these shares at times, but overall, investors appeared extremely reluctant to make significant buying moves in this space, amid rising concerns about the ability of builders to complete projects on time, liquidity issues faced by non-banking finance copanies and growing number of payment defaults by promoters.
The demonetisation move by the government in late 2016 impacted land and luxury residential segments and resulted in prices dropping by anywhere between 25 to 40%. The main reason for the correction was the fact that a large chunk of deals in the realty space were done through unaccounted money.
Slowly, some recovery could be seen after the government's thrust on its Housing for All scheme and the Pradhan Mantri Awasw Yojana plan resulted in many companies launching their affordable housing projects.
However, severe cash crunch in non-banking financial companies and IL&FS group's growing debt took the realty space by storm, triggering a few heavy bouts of selling.
The Nifty Realty index has lost more than 30% in the last one year, although in the past one month, the index has gained about 3%.
Indiabulls Real Estate, which has gained about 8.25% in the past one month, has shed as much as 61% this year. The next big loser in the Nifty Realty index is Prestige, which is down nearly 31% this year. However, in the past 30 days, Prestige has gained as much as 20%.
DLF (down 29%), Sobha (down 28%), Brigade Enterprises (down 26%) and Sunteck Realty (down 16%) are the other big losers in the realty space this year. Phoenix, Oberoi Realty and Godrej Properties have shed between 3.7% and 6%.
Brigade Enterprises has notched up over 19% this month, while Oberoil Realty has gained 5.5%.
The BSE Realty index, which was hovering around 2828.00 in late January this year, tumbled to 1534.58 by the second week of October, losing about 46% in the process, before edging up slowly to its current level of around 1800.00.
Still, the sector holds some promise if one is looking at medium to long term. The grant of infrastructure status to affordable housing and the announcement about Credit Linked Subsidy Scheme that makes available loans at affordable rates for buyers as well as developers are positives for the realty industry.
Strict regulations will weed out promoters who seldom comply with rules, but for quality developers and companies adhering to strict governance rules, surviving in the industry will not be a problem.
Investors looking for good returns over a long term, can still consider picking up shares of realty firms that have strong fundamentals and rank high in terms of timely completion of projects.