That said, some experts believe that it will be an uphill task for the developers to hike prices as the demand has not been too forthcoming.
“In current scenario of muted demand, we believe developers have limited headroom to take a price hike post GST rate revision. As a result margins will decline by 160 basis points (bps) in our base case. Developers in Bengaluru, Chennai, Hyderabad, Noida (lower cost of land) are likely to face margin pressure, while developers in Mumbai and Gurgaon / Delhi will benefit marginally,” says Abhishek Anand, an analyst at JM Financial.
Among stocks, Unitech, Sunteck Realty, Brigade Enterprises and Godrej Properties
rallied 1.7 per cent to 4 per cent in intra-day trade. On the other hand, DLF, Prestige Estates and Oberoi Realty
slipped 0.5 per cent to 0.9 per cent on the NSE.
According to reports, nearly 88 per cent of inventory is under construction in Mumbai Metropolitan region (MMR) region and 83 per cent in Bangalore and 87 per cent in the National Capital Region (NCR). Amongst the listed developers, Prestige estates has highest value of under-construction projects while DLF
has lowest inventory under construction, reports indicate.
Due to higher GST rate of 12 per cent on under construction projects, the demand here was subdued. With lower GST rate now, analysts now expect fence-sitters to show interest in buying under construction property and spur demand.
As regards margins, Gautam Duggad, head of research at Motilal Oswal Securities, too, feels that the developers' margins may take a hit due to non-availability of ITC as the cost will increase.
“It will be difficult for developers to pass on the increased cost, which shall be absorbed into the margins. We expect negative impact of nearly 3 per cent to 5 per cent fall in margins. For a Mumbai-based player where land component is high, especially for a player like Oberoi Realty, the impact is likely to be 3 per cent reduction in margin. For a south-based player (Prestige, Sobha
and Brigade) the impact will be higher to the extent of around 5 per cent dip in margins as the land cost is low,” Duggad says.
Among the lot, Chattopadhyay maintains a ‘buy’ rating on DLF, Oberoi Realty, Prestige Estates, Phoenix Mills, Brigade Enterprises, Sunteck Realty and a ‘hold’ rating on Godrej Properties.
He has an ‘add’ rating on Sobha