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SumanSpeaks Independent Capital Markets & Geopolitical Intelligence POLITICAL ECONOMY | PART 1: THE TELECOM TEST The Sangh’s Costliest Blunder: Keeping Narendra Modi in the Chair After Demonetisation and a Trail of U-Turns Two private giants, one state-propped survivor, roughly ₹3.22 lakh crore in announced BSNL revival and support packages (spectrum allocation included), and ₹1.41 lakh crore of AGR dues still on the books: telecom shows what happens when one man’s brand becomes the party’s only policy. This is an argument against Narendra Modi, not against the BJP. SYNOPSIS India’s telecom market has narrowed from a messy but real plurality into two dominant private networks, one weak private survivor kept alive by government equity, and a public operator that has needed about ₹3.22 lakh crore in announced support packages and spectrum allocations, not all of it cash. The 2010 spectrum auctions that started the debt spiral were a UPA-era event, and we say so plainly. But a ...
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Unitech Ltd: Buy
CMP: Rs.6.20
The Goods and Services Tax (GST), cleared by the Rajya Sabha, is a comprehensive indirect tax reform, which will be implemented throughout India and has broad implications on all sectors; including the real estate.

The implementation of GST can bring transparency in the construction and real estate industry, as per some property consultants.

Thus, GST is likely to bring about a major change in real estate sector at certain layers, but it all depends on the nature of transaction and rate of tax. 

The GST bill would benefit the real estate sector by creating a uniform tax structure. This would lead to better tax compliance by the builders and developers. Under GST regime, realtors see lesser tax burden on raw materials such as cement and steel. This will result in lower construction costs for developers.

The stakeholders are hoping for a positive impact of GST with no high fixed percentage tax which could boost the real estate market.

One thing is now almost certain: if the GST Act is implemented in the present form, it would increase the cost of real estate; which means those properties, which have already been constructed could see a positive domino effect on their prices - - helping companies like Unitech Ltd.

However, having said this, it is pertinent to mention here that the direct impact of GST on real estate will depend on whether the final GST rate is more or less than the taxes paid currently. Also, the roll out of the GST will take some more time and it is expected that the NDA governments will take due care of of any problem arising out of its implementation in the initial period; probably till one year. 

Buy Unitech Ltd at Rs.6.20, for a short term target of Rs.7.20. The Q1FY17, results of the company would be along the expected lines and the implementation of the GST (whether in its present form or a modified version) is a future event, so not much worry. 

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