Infra, realty companies stand to gain from rate cut
Real estate companies that have been reeling under debt will also gain
Mar 04, 2015
Source : Business Standard

 

Mumbai: RBI's surprise rate cut, much before its next month's meeting, means good news for infra, realty as well as high-debt companies. 

 

Banks had not cut their base rates after the RBcut the repo rate by 25 basis points on Jan 15. The gains, however, which typically come with a lag should start reflecting soon. 

 

Infrastructure companies like NCC, HCC, GMR, GVK, Gammon, Lanco, Sadbhav Engineering, Ashoka Buildcon and many more will stand to gain.

Apart from the interest rate cut, the gains from higher order flows will be bigger for construction companies given the government's focus on adding new infrastructure. The government has already raised the allocation towards infrastructure by Rs 75,000 crore for 2015-16 and is setting up an National Infrastructure Fund (NIF) with an initial capital of Rs 20,000 crore. What's more, the government will also be putting upfront 40% of the equity for the infrastructure projects.

 

On the other hand, real estate companies that have been reeling under debt will also gain. In fact, the share price of many companies is already reflecting the positive sentiments. As against the Sensex's rise of about a per cent, the BSE Realty index is up over 2.2%. Stocks like HDIL, DLF, for instance, are up over 3% each in Wednesday's trade.

 

The bigger gains, however, will accrue once the RBI cuts the rate further. Earlier, the expectations were that the central banker will cut rates by at least 75 basis points more this year. Going by this, there is hope for another 50 basis points of cut that could happen in the coming months. Together, it would mean a total of 100 basis points, which should prove sufficient to have a meaningful impact on interest costs of these companies.

 

The companies, however, would stand to gain more from the increase in business by way of more orders (in infrastructure space) and demand for houses (realty).

 

Investors thus could look at companies that are better placed in terms of execution and have sufficient operating profits currently to service their debt.

Latest Realty News

Realty-sector-says-land-not-an-issue
Mar 04, 2015
Bengaluru: Property consultants say the government can easily set up the proposed IIT campus within a 50-km radius of Bengaluru's central business district
Goldman-inks-$300m-realty-JV-with-Nitesh
Mar 04, 2015
MUMBAI: Wall Street bellwether Goldman Sachs is set to invest $300 million (Rs 1,850 crore) in a joint venture company floated by listed developer Nitesh Estates, which will own and operate commercial real estate assets in India
Civic-group-tells-Fadnavis-not-to-extend-deadline-for-DP-submission
Mar 04, 2015
PUNE: Civic organisation Parisar has strongly opposed political parties' demand for another extension in the deadline for the Pune Municipal Corporation (PMC) to submit the draft development plan (DP) to the state government
‘Concept-of-smart-cities-created-by-IT-companies’
Mar 04, 2015
PANAJI: The government's proposal to create 100 smart cities in the country boast of world class amenities maybe a step in the right direction
Karnataka-allows-regularisation-of-illegal-constructions-for-a-year
Mar 04, 2015
Bengaluru: The Karnataka government today announced its decision to implement the “Akrama-Sakrama” scheme for regularisation of unauthorised constructions
PE-fund-Brick-Eagle-buys-budget-housing-project-for-Rs-300-crore
Mar 04, 2015
Mumbai: Private Equity fund manager Brick Eagle has acquired anaffordable housing project in Karjat on the outskirts of Mumbai for Rs 300 crore
Bharti-to-enter-residential-realty
Mar 04, 2015
New Delhi: Bharti Realty, the real estate arm of Sunil Bharti Mittal-led Bharti Enterprises, is gearing up to enter the premium residential market in FY16
CREDAI-chief-hails-rate-cut
Mar 04, 2015
MUMBAI: Credai Chairman has described the RBI’s announcement of repo rate cut by 25 basis points as “an excellent move
Noida-plans-old-registry-rates-for-completed-flats
Mar 04, 2015
NOIDA: Homebuyers in Noida may not have to pay registration charges according to current circle rates for flats completed earlier
NGT-asks-civic-body,-pollution-control-board-to-survey-building-projects
Mar 04, 2015
BHOPAL: Green panel has asked civic body and state pollution control board to conduct a joint survey of building projects

Latest Realty News Of State

Realty Talk's