Realty stocks soar in light of the easing lockdowns

Overview

The ongoing pandemic has slowed down economic activities which have resulted in varied sectors being adversely affected by the same. The real estate sector, for instance, hasn’t been spared and growth and activity within the same have been sluggish. Despite its grim circumstances, however, real estate stocks appear to not be indicative of this slump the industry from which they emanate presently exhibits. Read on to learn more about the same and understand why this diametric opposition presently exists.

Introduction

The Coronavirus pandemic has wreaked havoc on the economy and varied sectors that operate within it. The social distancing requirements brought on owing to the air-borne nature of the virus and consequent lockdowns imposed to curb its spread have halted the functioning of commercial activities for the most part. Although as the lockdown has progressed and individuals and market participants have forged new, innovative ways to continue to carry out their operations, the second wave has taken a further toll on whatever attempts were made to bring the Indian economy out of its slump.

Realty Sector’s Grim Scenario

While earlier circumstances dictated that those involved in business operations went out of their way to operate ahead of schedule and get things in order in advance, these patterns no longer prevail during the present circumstances. Instead, homeowners seem to now be more cautious in their buying decisions. Real estate developers too, have caught onto this trend and have begun to defer their new launches.

When looking at the statistics, it is evident that the period following April this year witnessed a 50 percent decline in sales pertaining to housing projects in the country’s 7 most metropolitan and popular cities. This falls in sharp contrast to the prevailing trends evident in the previous quarter. Furthermore,  these facts hold particular true for the National Capital Region, Bengaluru, Pune, and the Mumbai Metropolitan Region. The second quarter of 2021 may therefore witness a decline in housing sales that amount to a 55 percent reduction when compared to the first quarter. The first quarter witnessed approximately 58,280 units sold in the country’s most popular metropolises.

Realty Stocks Seem Oblivious to the Grim Circumstances

What is promising, if not surprising, is the real estate sector’s performance in the stock market for this index. All the stocks present during this index reached new 52-week highs within the year 2021.

Of these stocks, the realty companies based out of Maharashtra witnessed benefits in the form of temporary stamp duty concessions provided by the state itself.

Moreover, close examination of real estate company stocks such as those pertaining to Sunteck Realty Limited, Oberoi Realty Limited and Godrej Properties Limited, each witnessed serious sales in the second quarter of this financial year. These sales have propelled their stocks to higher levels.

Factors that Govern the Realty Stocks Upward Streak

The demand for housing as it appears in its latent form is evident in the fact that sales revived following the first wave of the virus setting in and dips in the number of cases.

Should cases continue to reduce though, the third quarter should witness some improvements.

While it is understandable that some transactions and property deal might temporarily be put on hold owing to the pandemic and reduced funds individuals presently have access to, this scenario isn’t likely to remain the same and, therefore, isn’t expected to adversely impact the real estate sector over a longer time frame.

Moreover, if one were to examine the tools that the real estate sector has armed itself with in order to operate within the present circumstances, it is evident that they have successfully managed to adapt to digital methods for the most part such that their operations can run smoothly.

The accelerated pace at which vaccinations are now being administered is also promising as it indicates the grim circumstances pertaining to April this year now remain in the past. The second quarter of FY 2021 should reflect these positive implementations such that the situation can improve and thrust forward the real estate sector.

Conclusion

Once the definitive statistics pertaining to the second quarter of the financial year 2021 are declared, individuals should have a better idea of where the real estate market stands. Provided the cases continue to decline and the Coronavirus is kept at bay, real estate markets should witness an upward trend in the coming future.