Construction Ban : Caused by Dengue

September 3, 2018

WHAT & WHY IT HAPPENED ?

 

On Friday , 31st August 2018 , Honourable Supreme Court of India banned construction activities in Maharashtra , Madhya Pradesh , Uttarakhand & Chandigarh along with fine of Rs.3,00,000 each as they  have not complied with Solid Waste Policy.

 

Solid Waste Management Policy issue came to Supreme Court as a result of hearing of petition filed by parents who lost their seven year old kid due from dengue in 2015.

 

On July 10th 2018, Court had informed all States & UTs to comply with Solid Waste Policy which was passed through a notification in 2016.

 

Andhra Pradesh was fined Rs. 5,00,000 and Court has noted that there was no on represent the State.

 

Kerala has been given two weeks to file an affidavit on the same.

 

Order Copies

Order July 10th 2018

Order August 31st 2018

 

HOW WILL IT IMPACT ?

 

Scenario Assumption - Ban is not lifted anytime soon given the time was already provided by Court.

 

ECONOMIC IMPACT/STOCK MARKETS -

 

Real Estate Companies -

 

There is two risks due the judgement which can impact the Real Estate sector

 

1. Revenue Recognition :

Any stoppage of construction will result in loss of cashflow as revenues recognition in the new Accounting Standard is based on % of completion resulting impact on P&L.

 

2. RERA :

Maharashtra & Madhya Pradesh are top States with largest number of projects RERA registered. A lot of projects under the scheme have delivery dates first of half 2019 which would be tough to meet if the ban stays for even couple of months.

 

Companies - Capacit'e Infraprojects (High Impact) , Oberoi Realty ( High Impact)

 

Cement Companies -

 

Certain cities now have a policy of allowing Cement to be moved for a project only in instant mixer and not in bags. This will result in instant impact on the movement and pile of cement at the factory level.

 

Below we are able to see various companies and the number of plants they have in the banned states this might directly correlate to the magnitude of the impact they will face is construction is banned for long. As movement of production to other states will increase their logistics cost which are already increasing.

 

 

Companies - UltraTech ( Highly Impacted) , Ambuja ( Moderate Impact)

 

WHAT TO DO ?

 

We would advise to NOT to ADD/ BUY on this fall and wait for Court's view on the reply from States and would also be looking at if it gets extended to Andhra Pradesh and Kerala.

 

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