Are real estate stocks finally poised for a turnaround? After trailing the market for almost 18 months, analysts are certainly more positive, though the consensus is that only sentiments have improved and unless the ultimate user shows signs of buying, stocks will not outperform the broader market, going forward.

Most of the stocks have more than doubled from the lows of March. On Monday, about half the trading counters, which saw the biggest price changes, belonged to the real estate and related sector. Even as analysts say, one extraordinary day should not mean a complete turnaround or re-rating of a sector, they add that risk aversion for this segment has definitely softened in the past couple of months.

“We are turning positive on the sector. The problem started with two over leveraged companies — DLF and Unitech. Both were written off by the investors. The sector will attract attention of investors as liquidity has eased and funds are returning to the market gradually. Even as the first half of 2009 was tough, debt will be available for developers in metros now,” says Mehraboon Jamshed Irani, senior V-P — PMS, Centrum Broking.

Restructuring of debt, shifting focus from large apartments to smaller-size flats and lowering of rates have helped realty companies to just about keep afloat. A lot of developers have lowered their prices to generate sales and offload inventory. Companies have also become more realistic when it comes to pricing their own shares. For instance, cash-strapped Unitech raised $325 million, or Rs 1,621 crore, by way of a QIP at Rs 38.5 per share compared with a peak value of close to Rs 550 in January last year, while DLF promoters raised Rs 3,860 crore by selling about 10% at Rs 230 per share against Rs 1,205 again in January last year. Similarly, there are others like India bulls Realty and Sobha Developers among others, looking to raise funds.

Experts say even though a gradual improvement cannot be ruled out, the industry as a whole is expected to face challenges. “After the election results, the sentiment will improve significantly, giving confidence to corporate, investors, and public at large. Though, it would not have any direct bearing on the demand off take, investor confidence would be boosted,” says Anshuman Magazine, CMD of CB Richard Ellis, South Asia.

Courtesy:- ET dt:- 19-05-2009