Two Years Of Modi: Govt-Run NBCC Biggest Winner, Top Realty Firms Hobble

Two years ago, when the Narendra Modi-led Bharatiya Janata Party (BJP) bagged 282 of the 543 Lok Sabha seats and cruised to power with a thumping majority in the 2014 general elections, expectations went soaring. After all, it was the first time in the history of Independent India that any party other than the Congress had won a simple majority on its own. The tally of the National Democratic Alliance (the BJP and allies) was 336 seats, the most by a party or alliance since the Rajiv Gandhi-led Congress' 414 in 1984.

Going by Modi's promises in the run-up to the Lok Sabha elections, and the pro-industry development plank on which his party had contested and swept the polls, people expected his government to revive the country's industry across sectors. At a time when industry was struggling to tide over a demand slowdown, amid alleged corruption and the so-called policy paralysis in the last few years of the previous dispensation, Modi's rise to power at the Centre came as the much-needed hope. Also, its vast majority seemed to have given the new government enough political muscle to push its reform agenda.

Former Prime Minister Manmohan Singh had famously said in his 2011 Independence Day speech that there was no magic wand to tackle corruption. Three years later, while Modi brought the promise of clean governance and pro-industry policies, the markets expected him to show and wield the magic wand that he apparently had, and his predecessor didn't. It came as no surprise that the stock market welcomed Modi with a surge – the BSE benchmark Sensex, which had closed at 23,906.6 on May 15, 2014, a day before the announcement of the election result, gained 811 points, or 3.4 per cent, to close at 24,716.9 on May 26, the day the new government was sworn in.

The BSE Realty, the exchange's sectoral index for real estate, exuded an even greater optimism. It rose 358.6 points, or 23.7 per cent, from 1,515.2 to 1,873.8 over the same period.

But that was the beginning. Two years on, it may be time to assess how well the government has delivered on its promises, and how the market has responded to its policies and schemes. Days after the Modi-led government completes two years in office, PropGuide takes a look at some of the listed real estate companies (constituents of the BSE Realty index) that have seen the biggest gains or losses vis-à-vis the Sensex.

Sensex and BSE Realty

Over the two years since the Modi-led government was administered the oath of office, the benchmark Sensex rose by 1,164.29 points, or 4.7 per cent – from 24,716.9 on May 26, 2014, to 25,881.2 on May 25 this year. During this period, it touched a closing high of 29,681.8 on January 29, 2015, and a closing low of 23,002.0 on February 29 this year.

The real estate sector, meanwhile, saw its initial euphoria fizzling out over the stretch of these two years, with the BSE Realty declining 496.7 points, or 26.5 per cent. The highest the index climbed to during this period was 2,256.01, within days of the new government taking office, on June 9. The lowest it dropped to was 1,048.5, on February 11 this year.

Realty stocks

• NBCC

National Buildings Construction Corporation Ltd (NBCC), in which the central government owns a 90 per cent stake, gained the most during the first two years of the Modi government. The stock saw a phenomenal 228 per cent rise in value – from Rs 289.3 a share on May 26, 2014, to Rs 949.0 apiece on May 25, 2016 – mainly on the back of a robust order book. Recently, there were media reports suggesting that the Centre might be planning to sell 20 per cent of its stake in the company through the offer-for-sale route. At current prices, the share sale could fetch the government about Rs 2,300 crore. 

• Godrej Properties

The second-biggest gainer during the first two years of the Modi government was Godrej Properties. The stock rose from Rs 236.3 a share to Rs 320.7 a share – a jump of 35.7 per cent. The company got a boost from its relatively strong sales momentum, especially in the commercial real estate segment. In March this year, Godrej Fund Management, the company's newly created real estate fund management arm, raised Rs 1,900 crore from international investors for the group's property developments.

• Oberoi Realty

Yet another winner was Oberoi Realty, which also gained mainly from its launches and strong sales numbers, especially in the October-December quarter of financial year 2015-16. The stock rose from Rs 233.3 a share on May 26 two years ago to Rs 276 on May 25 this year, reporting an 18.3 per cent jump in value.

• Unitech

The shares of Unitech suffered the worst drubbing during the period coinciding with the Modi regime so far. Unitech's woes on account of multiple regulatory issues and penalties took their toll on the stock of the group's main business. The shares of Unitech Ltd plummeted from Rs 28.2 apiece on May 26, 2014, to Rs 3.9 on May 25 this year – a massive drop of 86.2 per cent over the two-year period.

• DLF

The stock of DLF, the biggest Indian real estate company by market capitalisation, reflected the general mood of the real estate market. Thanks to the sheer size of its business, DLF seemed the most affected by the downbeat sentiment on real estate during the period coinciding the first two years of the Modi government. The company was recently reported to have said that it would not launch any new project in 2016-17 and focus on diluting its inventory across cities. The DLF stock fell about 40 per cent – from Rs 204.4a share on May 26, 2014, to Rs 122.8 on May 25 this year.

• Sobha

Sobha Ltd was another real estate company that suffered a big drop in its share price over the past two years, mainly due to feeble offtake amid slow demand. Sluggish sales hurt the company's books over a longer period, even as its show in the October-December quarter of 2015-16 was mostly stable. The shares of Sobha Ltd dropped 33.7 per cent – from Rs 439.8 apiece on May 26, 2014, to Rs 291.8 on May 25 this year.

• Other stocks

Among the other seven stocks that are part of the BSE Realty index, five (Phoenix, Indiabulls, Omaxe, HDIL and Mahindra Lifespaces) reported gains in the range of two per cent to 14 per cent, while two suffered losses (Prestige of 20.2 per cent and DB Realty of 31.1 per cent).

Also read: Two Years In Power: Modi Govt Homes In On Real Estate Sector