Is it Right time to Invest in Realty Sector?

1. Realty sector has been the flavour of previous bull run and same sector contributed to Satyam scam with Satyam undertaking bogus land deals through Maytas Infrastructures. It is a news of relief that frontline realty companies have managed to tide over their liquidity crisis. Fund raising brings force to the perception that debt will be suitably reined. A few companies which have improved the sentiment are Unitech which has been able to raise $325 million through a QIP last month. Moreover its board has approved raising additional long-term funds by selling securities and issuing share warrants to its founders. DLF promoters raised Rs 3,860 crore by selling about 10% at Rs 230 per share against Rs 1,205 again in January last year. Indiabulls Real Estate plans to raise Rs.2820 crore through share sale to QIPs. Sobha Developers is also not far away from raising the money.

2. More expectations from UPA Govt as it is likely to give impetus to infrastrucutre growth with more sops in budget for the sector.

3. RBI may undertake more rate cuts and thus home loans will become more affordable.

4. Commodity prices cooling has brought more realistic prices and one is seeing overall cost reduction.

4. Due to non availability of demand the infrastructre companies are forced to cut down the prices and thus more buyers are available in market instead of speculators.

5. Banks are behaving rationally post ICICI bank fiasco and are executing stringent screening process.

6. Moreover Maharastra Government announcing reduction in floor space index (FSI) price and redevelopment plans of dozens of Mhada (Maharashtra Housing & Area Development Authority) residential colonies is likely to provide considerable impetus to this sector in times to come.
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