Real estate stocks on Tuesday meandered close to the territories seen after the Lehman collapse in September 2008, even as the sensex, which opened firm in the morning, closed 108 points lower. While most realty are down, there are some which are trading much above the levels seen during the peak of credit crisis in 2008 and 2009. The real estate index of the BSE was the worst hit, down 5.4% from its Friday's close.

Rising costs, tightening of fund flows from banks to the real estate sector by the banking regulator, and rising housing finance rates have started hurting real estate companies. Stocks of leading developers like DLF and Unitech are deep in the red when compared with the prices on October 27, 2008, the day the sensex had crashed below the 7,700 mark in intra-day trade. While Unitech is down 35% since that late-October 2008 lows, DLF is down 4.6%. For Unitech, non-core issues like the company's involvement in the telecom sector and also the alleged 2G spectrum scam is weighing on the stock, market players said.

On the other hand, the gainers included Sobha Developers and Parsvnath Developers, with both the stocks now trading at levels which are more than double of what it had touched then. One of the main reasons for the slide in the stock prices of leading developers like DLF and Unitech is the rise in interest rates in the economy. Since March 2010, the RBI has hiked policy rates 11 times, pushing up lending rates for banks. "Mortgage rates have gone up, while developers' costs have also risen. These have had their impact on the real estate sector," said Anshuman Magazine, CMD, CB Richard Ellis -South Asia, a leading real estate consulting firm.

Since the stock market investors look at the future prospects of companies while investing in stocks, the same does not look very bright. "We need to see how the next 3-4 months go... if interest rate rise hits the market too much," Magazine said. Broking house analysts also said that several projects are getting delayed because of rising costs and lower demand. And since demand for high-end properties is on the decline, some of the developers are also concentrating on projects which are either on the mid-segment or even at the lower-end, thus compromising on margins.

While there is no data to show that as an investment option, market players also said that the rally in gold prices is attracting more money from high networth investors than it used to earlier. This in turn is leading to cut in investments into the real estate sector. Compared to losses in some of the top developers, the smart gains in the others could be explained by the strategy some of the developers followed in charging the right price at right locations, industry experts said. They said that some of the projects had started ahead and have now completed, and these developers are on a better wicket now.