With the implementation of the 7th Pay Commission, voices are becoming louder that the real estate sector could gain from rise in salaries and pensions of the central government employees. The news may further boost real estate stocks which are already outperforming benchmark indices since the beginning of the ongoing financial year 2016-17.
The committee of secretaries tasked with reviewing the recommendations has given its report and the total outgo if the award, to be implemented from January 1, 2016, is pegged at Rs 1.02 lakh crore, which can work like a stimulus package for the economy, boosting consumer demand.
Reports of good progress of monsoon, which has already covered half of the country with normal rainfall, also raised hope of a drop in inflation, which can lead the central bank to cut interest rates further. Realty demand tends to rise in a low interest rate environment.
The sentiment were also perked up due to new draft rules unveiled by the government that showed developers may have to pay 11.2 per cent interest to buyers for delay in handing over apartments and homes.
Realtors’ two apex associations CREDAI and NAREDCO said the sector would also benefit from approval to a model law that allows shops, malls and cinema halls, among other establishments, to run 24×7 throughout the year. “It’s a very good decision. Hopefully it will lead to wise investment by the government staff for buying homes,” NAREDCO Chairman Rajeev Talwar said, commenting on approval for 7th Pay Commission recommendations.
JLL India Chairman and Country Head Anuj Puri said the retail sector accounts for about 15 per cent of the country’s GDP and this is expected to increase further with round-the- clock operations.
Shares of UnitechBSE 1.42 % closed 7.38 per cent higher, that of HDILBSE 3.12 % 3.01 per cent, Sobha DevelopersBSE 2.41 % 3.17 per cent and Oberoi RealtyBSE 0.59 % 1.03 per cent.
Industry leader DLF closed 7.86 per cent after reports that promoters KP Singh and family have decided to make the real estate company debt free by purchasing shares through a Rs 10,000 crore preferential issue. All the constituents of the BSE Realty index were trading in the green, with the index itself surging 4.30 per cent.
“This Act will have to be implemented by states. Once they have implemented it, offline retailers operating in those states will stand to benefit hugely as the Act brings them on a level-playing field with online retailers.”