In the recent years, the Narendra Modi-led government has introduced major reforms such as Real Estate (Regulation and Development) Act, Goods and Services Tax (GST), Insolvency and Bankruptcy Code and Benami Transactions (Prohibition) Act, to support the real estate sector struggling with dwindling sales, high inventory and price stagnation.
The GST council has also done away with the input tax credit (ITC) and reduced the GST rate for under-construction flats to five percent from 12 percent and for affordable housing to one percent from eight percent, from April 1, for all new projects.
While most realty stocks have given positive returns in the last 3 years, Indiabulls Real Estate has lost nearly 50 percent investor wealth in this period. The stock has fallen from Rs 87 in 2016 to Rs 44 currently, down 49 percent.
In comparison, the Nifty Realty index has gained 24 percent with 9 of 10 constituents gaining during this period. Sunteck Realty rose the most, up over 220 percent in the last 3 years, followed by Godrej Properties, which was up over 180 percent. Meanwhile, Phoenix Mills, Brigade Enterprises, Oberoi Realty and Sobha gained over 50 percent each. Among other gainers, Prestige Estate, Mahindra Lifespace and DLF rose between 4-44 percent.
Recently, the firm announced a share buyback of up to 5 crore shares at Rs 100 each which would cost the company Rs 500 crore. The company in a press note said, "Indiabulls Real Estate said that its board of directors on Friday "approved a proposal of Rs 500 crore of buyback of up to 5 crore fully paid-up equity shares representing approximately 11 percent of its total existing paid-up equity capital at Rs 100 per share".
The buyback is proposed to be made from all eligible existing holders / beneficial owners of the equity shares (including persons who become shareholders by cancelling global depository receipts and receiving underlying equity shares), on a proportionate basis, as on the record date, to be decided at a later date, the firm said. The board has constituted a buyback committee and delegated powers to it to oversee and implement the buyback of shares.
Overall, in the real estate sector, Motilal Oswal expects a 6 percent growth in 2019, after a 31 percent decline in 2018, while JM Financial expects the revenue of the sector to grow 30 percent and PAT to rise 12 percent.
In Q1, the company reported a consolidated net loss of Rs 119.36 crore and announced it will sell commercial assets for up to Rs 4,800 crore to become debt-free this fiscal year. It had posted a net profit of Rs 117.48 crore in the year-ago period.
While the real estate market has shrunk owing to the demand slowdown, certain big players are continuing to do well, said Vikas Chimakurthy, CEO of Kotak Realty Fund. "We still believe that there is a pain in the luxury as well as the premium segment at this point of time, though some people are doing well,” said Chimakurthy in an interview with CNBC-TV18.
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