Why Macrotech Developers Share Price is Falling

The Indian stock market is once again reeling under pressure on the back of stricter US monetary policy. Headlines say a higher interest rate regime can soon be back.

Now which sector comes to your mind when someone says 'interest rates'? The banking sector or real estate, probably.

These two sectors get affected the most when interest rates move.

This time around too, the Indian real estate sector is staring at a slump.

Both the Nifty realty index and the BSE Realty index have plunged more than 12% in 2023, with the Nifty Realty index falling more than 7% in the last week alone.

With the sector under intense pressure in recent weeks, Macrotech Developers stands as the biggest loser, down 30% in 2023.

Macrotech Developers share price slid over 10% on Friday last week to a fresh 52-week low.

Let's find out why...

#1 Rising interest rates dampen sentiment

With the Reserve Bank of India's monetary policy committee raising the key policy rate by 0.25% on 8 February 2023 and the higher-than-expected US inflation data, there are expectations of further rate hikes. As a result, interest rate sensitive stocks like realty are trading under pressure.

The RBI has been on an aggressive rate hike since May 2022. RBI hiked the repo rate for the first time in May 2022 when the setting panel unanimously hiked the benchmark lending rate by 0.4%.

This rate hike was followed by an increase of 0.5% each in June, August, and September. It further hiked rates by 0.35% in December 2022 and in February 2023.

These continuous rate hikes have led to short-term turbulence in the overall housing demand.

This is because when the central bank raises interest rates, borrowing costs for buying real estate increases, as most home loans are linked to the repo rate.

Further, this increased home loan decreases the affordability of houses of purchasing the house, creating a liquidity crunch in the market, reducing the housing demand.

In addition, a rise in the cost of essential raw materials like steel and cement due to geopolitical worries has driven up the input cost of realty companies.

Also, with inflation kicking in, the disposable income of people has taken a hit.

These factors combined have impacted the performance of the Indian real estate sector.

#2 Valuation concerns

Macrotech Developers is among the top overvalued stocks in India right now.

The current P/E ratio of the company is 428.11x, as against 45.1x in March 2022. This is also higher than the industry P/E of 33.7x.

This run-up in valuations can be attributed to several reasons, such as the company's performance and boom in the real estate market.

For the December 2022 quarter, it reported its best-ever Q3 pre-sales performance of Rs 30.4 billion (bn), showing a growth of 16% YoY on better housing demand.

How shares of Macrotech Developers have performed recently

Macrotech Realty shares have declined by more than 25% in the last one month. Over the past one year, shares are down more than 30%.

And in 2023 so far, the shares have eroded over 30%. After falling 10% on Friday last week, the stock is up 10% today and has at least recovered last week's losses.

Macrotech Developers touched its 52-week high of Rs 1,282.1 on 21 February 2022 and its 52-week low of Rs 711 on 24 February 2023.

About Macrotech Developers

Macrotech Developers Limited was formerly known as Lodha Developers. It is among the largest real estate developers in India and has been involved in the real estate business since the 1980s.

Being an Indian multinational real estate company, the company developed residential & commercial properties in Mumbai, Thane, Hyderabad, Pune, and London.

The company commenced operations in Mumbai, developing affordable housing projects in the suburbs of Mumbai. It later diversified into other segments and regions in the MMR and Pune.

It has also developed commercial real estate as part of mixed-use developments in and around our core residential projects to bring vibrancy to our residential development.

Currently, the company is developing 50 ongoing and planned projects across 75 million (m) square feet of area and for quality focus on details and elegant craftsmanship.

For more details about the company, see the MACROTECH DEVELOPERS company fact sheet and quarterly results on our website.

You can also compare Macrotech Developers with its peers on our website:

Macrotech Developers vs Prestige Estates

Macrotech Developers vs Sobha

Macrotech Developers vs DLF

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