India Developers Fall Most Since 2016 as Budget Gives No Respite
Unfinished apartments, abandoned part way through construction in Noida, Uttar Pradesh, India. (Photographer: Prashanth Vishwanathan/Bloomberg)  

India Developers Fall Most Since 2016 as Budget Gives No Respite

(Bloomberg) -- Shares of Indian real estate companies fell after the government failed to offer any stimulus measures to the sector reeling under a cash crunch.

The S&P BSE Realty index fell 7.8% on Saturday in Mumbai, the biggest drop since November 2016. While firms had been seeking steps to encourage purchases of homes and make it cheaper to raise money, India’s Finance Minister Nirmala Sitharaman only extended existing benefits for so-called affordable housing.

“One doesn’t see any major relief in the liquidity issue, which is a major challenge for the economy in general and real estate in particular,” said Niranjan Hiranandani, president of the National Real Estate Development Council.

The weakest economic growth in a decade has dented demand for apartments even as a crisis among shadow lenders squeezes financing for developers, leaving them unable to finish projects. Growth of home sales in India’s seven top cities slowed to 5% in 2019 from 17.6% a year earlier, according to Anarock Property Consultants.

Developers and analysts had mixed reactions to a new income tax structure, where individuals can avail lower tax rates if they forego some exemptions. While Shubham Jain, group head for corporate ratings at ICRA Ltd., sees non-applicability of this deduction on housing loans as a deterrent, Ashok Mohanani, chairman of Mumbai-based developer Ekta World, said more disposable income may trickle down to home buyers.

Other comments:

  • “Extending the tax holiday on the profits of developers involved in affordable housing projects to March 2021 is a huge support to de-bottleneck issues,” said Sunteck Realty Ltd., chairman Kamal Khetan.
  • Commercial real estate seen benefiting from government’s focus on warehousing
  • Announcements such as creation of new airports, completion of Delhi-Mumbai expressway, warehouse investments is very positive for commercial real estate, said Anuj Puri, Chairman of Anarock Property Consultants

©2020 Bloomberg L.P.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.