Shares of real estate companies were up, but gave back a portion of early gains, as investors booked profits in choppy trades. Analysts said the spurts of strength in realty stocks in recent days can be attributed to hopes of further cuts in interest rates.
“Most of the strength in selective stocks is due to hopes of interest rates going down. Since last few days, we have witnessed a series of rate cuts by banks due to pressure from the government. At this point of time, concern about lending to real estate sector is still weighing on majority of institutional investors,” says a real estate analyst.
At 12:30 PM, BSE Realty was at 2,237.35 points, up 1.4% from the previous close, but off the day’s high of 2,291.21.HDIL, Indiabulls, Unitech and Parsvanath, which were up over 2%, were leading the pack of realty gainers.
Investors are hoping that the cut in interest rates would spur demand for property, but analysts said that is not enough. It is believed that realty players should cut prices significantly to revive demand from prospective clients, which will also ease the burden of these companies.
Expectations of a sustained strength in property prices had led to builders buying lands at exorbitant prices through borrowed money. But, with sales drying up following the sharp rise in interest rates, these highly-leveraged companies are under great deal of pressure.