On Thursday, shares of real estate companies jumped as much as 7.4% in early morning trade after the Maharashtra government on Wednesday slashed premiums and levies charged on construction by 50% till December 2021.
This also includes concessions in the premiums levied by all planning authorities/local administrations in Maharashtra. A rider is that developers availing the discount need to bear the stamp duty costs of 5-6% of agreement value on behalf of buyers.
The move is expected to boost the real estate sector in the state.
BSE's Realty Index was up 3.5% to 2,607.41, one of the biggest gainers among sectoral indices.
"While we await the fine print on the exact nature and terms of the FSI/premium waivers, key beneficiaries of the waiver will be developers who have adequate liquidity and have the confidence to launch and sell new projects, especially in the Mumbai city and suburbs," said ICICI Securities on the sector.
"Developers in our coverage universe with significant Mumbai exposure including Oberoi Realty, Godrej Properties, Phoenix Mills, Prestige Estates and Sunteck Realty stand to benefit," it added.
The brokerage has a buy rating on Sobha Ltd with a revised target price of Rs 505/share from Rs 382 earlier as it rolls forward to Mar-22 NAV and build in higher sales volumes over FY21-23E. "Ability to keep debt levels in check remains the key monitorable," ICICI Securities said.