Realty shares rally as Maha govt slashes premium for construction by 50%

  • 7Jan 2021

    Shares of real estate companies were in focus, surging by up to 7 per cent, on the BSE in the early morning trade on Thursday after the Maharashtra government on Wednesday slashed premiums and levies charged on construction by 50 per cent till December 31 2021. The move is expected to give a boost to the real estate sector in the state.

    Following the development, shares of Sobha, Indiabulls Real Estate, Sunteck Realty, Oberoi Realty and Godrej Properties rallied between 5 per cent and 7 per cent on the BSE in the intra-day trade.

    At 09:27 am, the S&P BSE Realty index, the top gainer among sectoral indices, was up 2.8 per cent as compared to a 0.57-per cent rise in the S&P BSE Sensex. The realty index hit 52-week high of 2,607 in the intra-day trade today.

    According to a Business Standard report, the cut, under the Development Control and Promotion Regulation 2034, will apply to both ongoing and new projects. Municipalities charge this premium on floor space index (FSI).

    "This move will go a long way in expediting project completion and the market will witness new launches. The industry applauds this booster dose making many projects viable and we shall adhere to the rules laid down in lieu of availing these benefits," said Niranjan Hiranandani, Chairman at Hiranandani Communities.

    The cut, Hiranandani said, will also reduce the input cost over a period of time, and there is a possibility that the new inventories may have reduced prices. CLICK HERE TO READ FULL REPORT

    Meanwhile, Mumbai and Pune markets led the revival with both sales as well as new launches recovering significantly in the second half (July-December) of the year calendar year 2020, a Knight Frank India report on India Real Estate: H22020 said.

    "While all India residential sales saw a quarter-on-quarter (QoQ) rise of 84 per cent, Mumbai (193 per cent) and Pune (143 per cent) recorded higher than average QoQ growth. This was mainly due to the Maharashtra State Government’s initiative to reduce stamp duty by 300 basis points (BPS) for a limited period between September-December 2020 making home buying very attractive," it added.

    Apart from pent-up demand, there has been a combination of factors like lower housing prices, attractive offers/ discounts by developers, multi-decade low interest rate, high household savings that has given a strong fillip to residential sales. Government policy support like the stamp duty cut in case of Maharashtra has been a very supportive factor for the pick-up in residential sales in this region, said Rajani Sinha, Chief Economist and National Director, Research at Knight Frank India.

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