Nearly all listed real estate companies traded significantly lower on October 7 after Reserve Bank of India (RBI) governor Sanjay Malhotra's announcement of a 25 basis point hike in the repo rate to 5.50 percent, the first hike in three years, and also changed its stance to calibrated tightening. The move signalled to investors that home financing costs could rise and that expectations of near-term rate cuts may have to be pushed back.
At close of trading on October 7, all major real estate stocks were in the red, including the nation's most valued developer DLF, down by 1.7 percent, Lodha Developers, lower by over 2 percent, Aditya Birla Real Estate, closing 3.1 percent down, as well as Bengaluru-based Prestige Group (by 2.6 percent), Puravankara (by 0.5 percent) and Brigade (2.6 percent).
Smaller listed developers also took a hit, such as Sunteck Realty, lower by 0.5 percent, as well as Arkade Developers, closing lower on the National Stock Exchange by 1.2 percent. In the earlier hours of trading, some developers, such as Aditya Birla Real Estate, as well as Mahindra Lifespace Developers, initially traded higher, due to their longer-term revenue visibility and land banks, before also trading lower, along with its peers.
Analysts said that the initial market reaction to the RBI announcement should not be interpreted as a broader sell-off in realty stocks, noting that interest and mortgage rates are still lower than recent peaks in 2022 and 2023, when they touched 9 percent on the back of even tighter monetary policy.
However, the market's reaction was also driven by Malhotra's announcement that rate cuts are off the table in the near future.