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Stock market shows the way forward for realty

Posted on by Track2Realty

By: Ravi Sinha

Track2Realty Exclusive

india realty news, india real estate news, real estate news india, realty news india, india property news, property news india, india news, property news, real estate news, India Property, Bombay Stock Exchange, BSE, Real Estate Stocks news, Real Estate Share Prices, Track2Media, Track2Realty, Track2InfraThe stock market is not only showing the investors’ confidence index going up. It is also indicating the way forward for the Indian real estate. After all, investor sentiment on the bourses have often led to the recovery of the real estate market as the investment grows to the next level of confidence for a long term investment. It may be too early for concluding whether the stock recovery is here to stay and lead to revival of the fortunes of the real estate, yet Track2Realty finds the debate has gained ground. While the developers are optimistic about the money sooner than later coming into the sector, the critics have their own reasons to advice wait & watch policy, if not outright denial.

An outside view on the investment pattern in the Indian market might give the impression that there is absolutely no co-relation between the investments into these two different investment instruments. Critics often even point out that the two investment baskets actually work at the cross purposes. They maintain that while the stock market is driven by the small ticket & high risk investors, the real estate is relatively low risk and safe investment. However, such outside view often just take into account the investment pattern of the retail investors and not seasoned big-ticket investors and the Foreign Institutional Investors (FIIs). There is a strong co-relation between the investment pattern of these two diverse options and often it is the Sensex that shows the way forward to the real estate.   

Historically, it is the bourses that have been the first to attract the investors in the cyclic upward movement of investment. It then leads to a shift in real estate over a period of six months to one year. The trend has been as much noticed in the global market as in the Indian market. Facts speak for themselves to describe the co-relation between the two. The real estate sector has been facing a slowdown since the end of 2009 and on the same pattern the BSE Realty index has fallen over 57 per cent from November 2009 to April 2014.

Now with the recovery of the market this financial year, till August 4, the Bombay Stock Exchange (BSE) Realty index had risen 30 per cent to 1,893. It was at 1,456 on April 1. The BSE Sensex rose 14 per cent during the period. The BSE Realty index is the only index that has not recovered from the lows touched during the 2008 crisis. The index, which touched 2,270 on June 9, 2014, after rising from below 1,250 in March, is now back around 1,900. It touched a high of 13,647.15 on 14 January 2008 and fell to 1,303 on 9 March 2009. The trend of recovery in real estate seems to be on the same lines and as per the Reserve bank of India (RBI) the amount of housing loans, including for priority sector housing, rose 3.20 per cent from Rs 5,45,100 crore in April 2014 to Rs 5,63,100 crore in June 2014.  

However, Sumit Jain, National Director, Finance & Administration with Colliers International maintains that stock market growth should ideally lead to spill over on realty but it is too early to comment on this. He says that the equity market is currently driven by domestic and foreign institutional investors. Return from equity reviving real estate market will take a much longer time. Retail investors need to first recover the past losses before they take out returns and invest in real estate.

Abhay Kumar, CMD of Grih Pravesh Buildteck, on the other hand strongly feels there is a link and the stock market upsurge has a direct correlation with the realty. He asserts that historically it has been observed that usually there is a six months to one year gap in rally where realty market follows stock market. Currently stock market is making all time high almost every week and the market does not look very attractive at this point in short term but the long term market still looks bullish. In such events the spill over from stock market to the largest asset class which is realty is bound to see some fresh funds percolating.

‚ÄúRealty market is going through tough times and stock market can bring back some cheer. In India we always see whenever there is bull market initially overseas funds are the main reason for it and later the retail and domestic funds start pouring in, this bull market is no different. Retail investors were extremely cautious to enter as the 2008 bear market is difficult to forget, retail investors are gradually but firmly coming back to market. Indians by nature like real estate market as they look it as low downward risk avenue. Whenever they realise some real profit from stock market they immediately switch their investment to realty. In this rally one can see some serious investors who are participating in stock market and once they book profits it would help in revival of real estate significantly,‚ÄĚ says Abhay.

Rattan Hawelia, Chairman Hawelia Group also believes that the real estate market and stock market are interconnected in multiple ways. In existing scenario, with relatively stable economic conditions, there is a growth in the stock market and hence a positive impact on real estate sector is expected. He adds that since growth of real estate sector leads to the growth of other multiple dependent industries, an incremental effect on the stock market can also be anticipated.

‚ÄúThe reform process and focus on allowing FDI in realty sector has brought the necessary momentum and has rebuild the confidence in investors’ minds, specially on the international front. This would attract the hesitant investors to India which will certainly have a positive impact on the revival and development of real estate sector. Further, with the presence of a strong government and bold investor-friendly policies, we can anticipate appropriate incentive to serious investors and hence an eventual improvement in the real estate market,‚ÄĚ says Hawelia.

¬†Geetambar Anand, CMD of ATS Group believes the bull run is likely to continue for next 2-3 months but it would be interesting to see how the home buyers regain their confidence by the gains in the short-term capital markets which will ultimately melt down to the long-term investments with longer time horizons. ‚ÄúThere are serious investors who are currently driving the equity markets, the inflow of funds are also likely to improve in the real estate markets as the investor confidence shoots up,‚ÄĚ says Anand.

 In a nutshell, the investment, both in stocks as well as real estate, usually moves in tandem with economic growth. The investment pattern of both the retail investors as well as the institutional investor is no different either. That is why economic slowdown over the past few years hit both the Sensex and the real estate market badly. But with the prospect of economic recovery and change in sentiments the investors are back in market, and hence the debate over the choice of investment portfolio Рstocks, realty stock & real estate Рis gaining ground yet again. It is a good sign for a market waiting for any upward movement for long. What can be vouchsafed at this point of time is that investors are back in market with stocks and that raises hopes for the money to come in the safest investment instrument. Historically, this has been the trend.

 Advocates see co-relation

  • Historically, investment in stocks & real estate has a co-relation
  • Historically stock market surge has led to revival of realty
  • On Sensex Realty Index the first to recover
  • Both realty & stock sentiment driven

Critics find disconnect

  • No co-relation of stocks & realty investment
  • Impression of a co-relation only because bullish economy leads to investment everywhere
  • Small ticket investment with stocks against big ticket investment with property
  • Stocks investment for short term but realty investment for long term

 Quick stats

  • ¬†Since 2009 realty down & BSE Realty index fallen over 57% from November 2009 to April 2014
  • ¬†Till August 4, 2014, the Bombay Stock Exchange (BSE) Realty index had risen 30 per cent to 1,893. The BSE Sensex rose 14 per cent during the period.
  • ¬†The BSE Realty index is the only index that has not recovered from the lows touched during the 2008 crisis.
  • ¬†Realty index touched 2,270 on June 9, 2014, after rising from below 1,250 in March, is now back around 1,900.
  • ¬†Realty index touched a high of 13,647.15 on 14 January 2008 and fell to 1,303 on 9 March 2009.
  • ¬†The trend of recovery in real estate seems to be on the same lines
  • The Reserve bank of India (RBI) the amount of housing loans, including for priority sector housing, rose 3.20 per cent from Rs 5,45,100 crore in April 2014 to Rs 5,63,100 crore in June 2014

Realty stocks not a brand equity barometer-III

Posted on by Track2Realty

india realty news, india real estate news, real estate news india, realty news india, india property news, property news india, india news, property news, real estate news, India Property, Bombay Stock Exchange, BSE, Real Estate Stocks news, Real Estate Share Prices, Track2Media, Track2Realty, Track2InfraTrack2Realty Exclusive: More holistic approach is required while conducting a research on any real estate entity. The scientific research should undertake a detailed analysis on the accounting policy, business model, geographical presence, sales & execution strategy, project portfolio of the company. It should also take into consideration the company’s initiatives to monitor its operations for timely delivery of the project without cost overruns & sustaining margins.

This anomaly may be the reason why RICS maintains a stand to not comment specifically on any company’s stock movements or market performance or sale figures. In addition, it does not support or favour any particular company’s stock.

‚ÄúStock movements on various exchanges could be just one parameter to judge a company‚Äôs performance. However, there are a number of other factors that forms the basis of evaluating a company‚Äôs strengths and weaknesses. These include: location of its projects, debt on its books (if reported), debt-equity ratio, surrounding infrastructure, demand within the region for its projects and various other local factors that may impact the overall performance of the company from the construction side,‚ÄĚ says Sachin Sandhir, MD, RICS, South Asia.

How come some companies with limited geographical presence are doing so better on stock market? In India, the real estate sector is regional in nature and each region is broken into micro-markets which in turn have different dynamics. Being a local player it is relatively easier for a real estate company to focus on set of micro markets & timely deliver projects.

Ideally, a company with a pan-India presence will be able to lower geographical risk compared to a regional company with similar characteristics. However, having a pan-India presence requires a company to have a strong understanding of the local markets (customer preferences, regulatory requirements and resource capabilities).

With the current model real estate companies have been able to perform in a region & very few companies have gone on national level for development. The regional company with focus on few micro-markets has meant benefits of higher promoter involvement (with past and localized experience) & higher returns for the investors, this in turn helps the regional players to outperform against the national players in real estate market.

However, this does not hold true in all cases. Companies that boast of a pan India presence certainly rake the benefits of higher visibility. But real estate has become a more of a regional play as against owning a national footprint. Thus, it will still be the financial strength, operational excellence, timely delivery, quality consciousness that shall hold more relevance for fair performance on the exchanges.

A stock price estimate of a company is primarily driven by financial analyst’s outlook of the expected earnings growth of a company & financial health.  The share price reflects the anticipated growth or decline of the company in short to medium term future. This might not be a true picture for a real estate company which has an average project cycle of 3-5 years. If the company is able to sell the inventory of a project then the company will be able to safely accrue revenue for next 3-4 years.

It is only the companies’ strategy that would be crucial in deciding on the long term performance of the company, where stock price is just one of the indicators.

Realty stocks not a brand equity barometer-I

Posted on by Track2Realty

india realty news, india real estate news, real estate news india, realty news india, india property news, property news india, india news, property news, real estate news, India Property, Bombay Stock Exchange, BSE, Real Estate Stocks news, Real Estate Share Prices, Track2Media, Track2Realty, Track2InfraTrack2Realty Exclusive: Nearly Real estate stocks have been on a roller coaster ride for the last few years but 2012-13 has been witness to some stability in the realty index. Critics call it more speculative than any other index as the disconnect between the respective company and its stock has often been devoid of logic.

Track2Realty studies the stock market performance vis-à-vis the realty companies’ overall brand equity to find realty stocks can not be a brand barometer as various factors (within & beyond company’s control) do play a role in stock movement.

The optimists within the sector assert the worst is over for the realty index and most of the listed realty companies are determined to cut the debt. In addition, they maintain that stock market performance is not the barometer to judge the company’s financial performance or the brand image.

Critics, however, allege barring a couple of exceptions, most of the realty stocks are today trading way below the listed price.

Those who believe in the glass half full theory of optimism, however, term it as the fundamental reason why realty stocks will do better in the days to come. They believe the resilience of realty stocks have weathered the worst cycle of economic meltdown where most of the realty companies had to restructure their portfolio.

Moreover, the stock market itself has not performed well post Lehman crisis. The sectors considered as high-beta sectors (high co-relation with index) have therefore not performed that well like infra, real estate, telecom, banking etc. All have seen re-rating and hence stocks are trading below their listing prices.

Most of the real estate companies were listed in the boom period of 2005-2007 where the outlook was overly positive & there was large liquidity flow in markets. With the change in the international economic situation & downturn in the domestic stock markets the stock prices of these companies had steep variation.

Due to the uncertain environment from 2009 -2012 the share prices of these real estate companies have not been able to recover. The second factor had been that in the boom time land bank was a major valuation criterion & not the actual projects being delivered or the capability of being delivered in a timely manner by these companies.

The recovery of realty stocks in the last one financial year has been the culmination of several factors. One, investors’ belief that realty firms have hit the bottom; two, improved financials as realty firms tried to lower debt by raising funds through equity or divesting non-core assets as with DLF Ltd. And the third factor is the hope that a fall in inflation and interest rates will lead to sector’s profitability in the year ahead. Through the slump, firms like DLF, Indiabulls and Unitech have tried to hasten execution and cut construction costs to ease pressure on profit margins.

Today, majority of realty projects are delayed owing to multiple factors ranging from regulatory approval delays, land acquisition, liquidity crunch, inadequate planning, restricted project & execution capabilities, lack of scalable processes and trained resources.

Stock rationalization when coupled with higher demand and sales, will improve the return on equity of real estate firms. Historically, sales have improved with a reduction in interest rates, which is expected in the year ahead.

…to be continued

Kolte-Patil Developers Q1 FY14 net jumps 115% to Rs. 26.40 crore

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india realty news, india real estate news, real estate news india, realty news india, india property news, property news india, india news, property news, real estate news, India Property, Bombay Stock Exchange, BSE, Real Estate Stocks news, Real Estate Share Prices, Track2Media, Track2Realty, Track2InfraTrack2Realty: Kolte-Patil Developers Ltd. has reported a jump of 115% in its net profit to Rs.26.40 crore for the first quarter ended June 30, 2013, compared to Rs.12.26 crore for the first quarter last fiscal. During the same period its revenue increased by 112% to Rs.219.43 crore from Rs.103.29 crore.

The company’s EBIDTA increased by 112% to Rs.66.69 crore for Q1FY14 from Rs.31.47 crore in the same quarter last year.

Sujay Kalele, Group CEO, Kolte-Patil Developers said, ‚ÄúWe at Kolte Patil have been successful to attain the momentum with a strong performance which can be reflected through our performance for Q1 FY 14, which in turn is a result of our constant endeavor for the customer satisfaction through quality construction and timely delivery of our projects.‚ÄĚ

KPDL managed to keep the EBIDTA margins intact at 30% in Q1FY14.

The basic EPS for Q1FY14 stands at Rs.3.48 compared to Rs.1.62 in Q1FY13.

‚ÄúWith concentration on the few key luxury projects in addition to the townships and affordable housings, we have been able to maintain the growth and the margins during Q1 FY14. We‚Äôll be looking forward to add couple of more projects in our kitty within the existing markets along with adding some of the key projects by entering the newer markets like Mumbai during the current financial year,‚ÄĚ Sujay Kalele added.

REIT’s may solve India’s real estate problem: Knight Frank Research

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india realty news, india real estate news, real estate news india, realty news india, india property news, property news india, india news, property news, real estate news, India Property, Bombay Stock Exchange, BSE, Real Estate Stocks news, Real Estate Share Prices, Track2Media, Track2Realty, Track2InfraTrack2Realty: India faces shortage of fresh supply of houses, the Technical Group on the Estimation of Housing Shortage projects the total shortage of dwelling units in urban areas in 2012 to be 18.78 million, said a report by Knight Frank Research.

The estimated slum population in India is 94.98 million in 2012. As against this, the number of dwelling units sanctioned under JNNURM in seven year Mission period was 1.6 million.

The report further said that by 2031, about 600 million Indians will reside in urban areas, an increase of over 200 million in just 20 years. This change in the socio-economic landscape will have a bearing on several things, housing being the foremost.

The industry facing continued pressure in terms of raising funds for investment, the research report suggests that India must have a Real Estate Investment Trust (REIT). A REIT is a company that directly owns income producing real estate assets and provides a trading mechanism to the investors.

‚ÄúOn one hand an institutional market of REITs can ensure steady supply of capital to real estate development which shall aid in increasing the supply of houses and on the other it shall serve as an investment vehicle for individuals,‚ÄĚ said the report.

The depth of the REIT investment vehicle in developed markets can be assessed from the amount of capital raised over the years. For instance, in the US market, REITs have raised $66.8 billion in 2012 (until November) alone and the momentum of fund raising through this investment vehicle has steadily increased since the global financial crisis of 2008, said the report.

India on the other hand has been slow to look into such a mechanism. Securities & Exchange Board of India (SEBI) had issued draft REIT Regulations in 2008. However, things have not moved since that time.

‚ÄúReason being that the confusion with another set of guidelines for Real Estate Mutual Funds (REMF) in 2008, which has also not translated in to product offerings yet. This confusion arises from the fact that both would regulate a similar product. Also lack of transparency and uncertainty involved in the conduct of real estate business has delayed the establishment of the REIT investment structure,‚ÄĚ pointed the report.

The World Bank report ranks India at 182 out of 185 countries in the ‚Äėdealing with construction permits‚Äô category.

In the absence of REIT guidelines in the country, some real estate developers have already listed their REIT’s overseas. These investment vehicles invest in FDI compliant properties in India and hold both commercial and residential properties mainly at the development stage.

The properties within these schemes are located in top urban centers like Delhi-NCR, Mumbai, Bangalore, Chennai, Kolkata, Hyderabad and Pune. However, these vehicles were floated before the global financial crisis and the investors are yet to see meaningful returns from these.

The reports also suggest that in light of the dwindling interest among investors to invest in Indian real estate, such a mechanism is important.

Institutional finance to the sector has witnessed a slowdown. Bank credit to the sector has slowed down on account of increased risk perception. In the last two years, the growth in banks’ credit exposure to the real estate industry has come down from 19.08 per cent in November 2010 to 5.29 per cent in November 2012.

Similarly, foreign investment in the sector has also witnessed a downtrend , the share of real estate has declined  from 9 per cent in FY12 to 5 per cent in FY13 (until Oct) in the total inflows in the country.

The last two years have contributed less than 1 per cent to the total IPO money raised by the industry in the last seven years highlighting the uncertainty of this source of funds.

Reliance Capital plans Rs 1k crore realty focused fund

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india realty news, india real estate news, real estate news india, realty news india, india property news, property news india, india news, property news, real estate news, India Property, Bombay Stock Exchange, BSE, Real Estate Stocks news, Real Estate Share Prices, Track2Media, Track2Realty, Track2InfraTrack2Realty-Agencies: Reliance Portfolio Management Services, a part of the Anil Dhirubhai Ambani Group-owned Reliance Capital, plans to launch its maiden realty-focused fund by end-2012, with commitments of Rs 1,000 crore.

The new fund, Reliance India Realty Opportunities LLP, will invest only in residential real estate and has identified the Mumbai, Delhi, Bangalore, Pune and Chennai property markets as its prime investment destinations, according to some media reports quoting company insiders.

The fund will reportedly act as a bridge financier for projects which have been stalled due to a shortfall of capital, with the average investment ticket size estimated at Rs 100 crore. Reliance ADA is expected to be one of the anchor investors in the fund that will target internal rate of returns between 18% and 22%.

When contacted by Track2Realty, the company refused to comment. As per market reports the new fund will have a hybrid structure and will provide both debt and equity to the projects it invests in.

There have been 29 real estate investments estimated at $1.04 billion (Rs 5,500 crore) this year, a 72 per cent drop in cumulative deal value from 2011, which saw 87 deals worth $3.9 billion, according to research firm Venture Intelligence.

SRG Housing Finance SME IPO opens on 22nd August 2012 with Rs 20 issue price

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india realty news, india real estate news, real estate news india, realty news india, india property news, property news india, india news, property news, real estate news, India Property, Bombay Stock Exchange, BSE, Real Estate Stocks news, Real Estate Share PricesSRG Housing Finance Limited, a growing housing finance company with registered office atUdaipur in Rajasthan, proposes to enter the capital markets on 22nd August 2012 with a public issue of 35,04,000 of Rs 10 each. The Issue price for this IPO to be listed on SME platform of BSE has been fixed at Rs 20 per equity share of Rs 10 each. The Issue closes on 24th August 2012.

Out of this public issue of 35,04,000 equity shares, 4,98,000 equity shares are reserved for Promoters and 4,08,000 equity shares are reserved for Market Makers, leaving a net public issue of 25,98,000 equity shares. The Issue and Net Issue will constite 43.36 per cent and 32.15 per cent respectively of the post Issue paid equity share capital of the Company.

Aryaman Financial Services Limited is the Lead Manager and Sharex Dynamic (I) Pvt. Limited is the Registrar for the Issue. This will be the 7th SME issue on BSE SME platform.

The Company is primarily engaged in the business of providing housing finance for home ownership, by offering individual home loans and loans against property. Presently, it has one head office and 3 satellite centers located in Rajasthan and the Company is targeting to open another 10 satellite centers which are to be located in tier 2 cities, tier 3 cities, District and Tehsil head quarters and at the peripheries of tier 1 cities. These are their key target markets, based on their belief that they are underserved by larger Housing Finance Companies and banks.

The outstanding loan portfolio of SRG Housing Finance Ltd has grown at a CAGR of 24.13% from Rs 318.89 lakhs as of March 31, 2008 to Rs 757.13 lakhs as of March 31, 2012. At the same time, its profit after tax (PAT) has grown at a CAGR of 30.43% over a four year period from Rs 11.13 lakhs for Fiscal 2008 to Rs 32.21 lakhs for Fiscal 2012.

The Company proposes to augment its capital base and provide for its fund requirements for increasing its operational scale with respect to disbursement of housing and related loans activities, through this Issue.

SRG Housing Finance Ltd propose to augment its capital base by Rs 635 Lakhs and utilize the funds raised from the same to further increase its operational scale of such business activities and assets, which will consequently result in an increase in its net worth and enable the Company to meet its future capital adequacy requirements.

It will further help the Company to develop close relationships with individual households and enhance customer relationships. The Company is in compliance with the capital adequacy norms of the NHB Directions 2010.

Revenues of top 25 listed realty companies decline by 9.30% in Q4FY12

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india realty news, india real estate news, real estate news india, realty news india, india property news, property news india, india news, property news, real estate news, India Property, Bombay Stock Exchange, BSE, Real Estate Stocks news, Real Estate Share PricesRevenues of top-25 realty companies declined 9.30% in Q4FY12, mainly on account of low sales off-take due to higher prices and higher mortgage rates, says a Knight Frank India Research on Economy and Realty at glance. The study says the Realty Index on Bombay Stock Exchange (BSE) has dropped by more than 26% during the last one year compared to a 10% fall in the Sensex during the last fiscal year.

In order to bring back the enthusiasm of the investor community into the sector, real estate companies will have to focus on factors such as improving cash flow position, lowering inventory, reducing debt and increasing profit margins.

RBI in its mid quarter review of monetary policy in June reaffirms that cheap interest rate is a far-fetched expectation in the wake of high inflation rate.

During the March 2012 quarter, interest cost as a percentage to sales stood at 15% compared to only 8% reported during the March 2010 quarter.

Although international crude oil price has declined by 20% since the beginning of the last fiscal year, the price of domestic fuel has gone up because the depreciation in Indian currency against USD by 25% during the same period has made import of crude oil expensive.

The Indian Rupee has depreciated by 18%, 8% and 32% against the British Pound, Euro and Yen respectively. Hence, a stubbornly high inflation rate will defer a lower interest rate regime.

Not so happy Q4 results expected for realty companies

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india realty news, india real estate news, real estate news india, realty news india, india property news, property news india, india news, property news, real estate news, India Property, Bombay Stock Exchange, BSE, Real Estate Stocks news, Real Estate Share PricesReal estate companies reeling under the bad debt and falling sales graph are expected to record yet another bearish quarterly results with most of the listed companies’ shares already in the red. Listed real estate companies represented by the Realty Index on BSE have witnessed a fall of 1.7 per cent over the past one month. The BSE Sensex fell by 1.4 per cent. This indicates benign expectations from the stock market from real estate companies.

Analysts expect these companies to report a decline in revenue and profit growth. Consolidated sales could improve due to new project launches. However, profitability of companies is expected to remain under pressure. The consolidated sales growth in real estate companies is likely to 20 per cent for the quarter to March 2012 in comparison to the quarter to March 2011. The net profit growth is expected to fall by an average 40 per cent over the year ago period.

Analysts do not expect any significant debt reduction for real estate companies. ‚ÄúLack of asset sales during the quarter could lead to some addition to consolidated debt for the company,‚ÄĚ says ICICI Securities on DLF, the biggest real estate company. Companies like DLF have been looking to sell non-core assets like land parcels and joint ventures in the hotels business. However, these sales are unlikely to be completed in the quarter to March 2012.

Kotak Securities expects DLF to report a 20 per cent fall in sales and a 43 per cent fall in the net profit. Oberoi Realty is expected to report a 27 per cent drop in sales and 34 per cent fall in the net profit. HDIL is expected to report a 12.5 per cent drop in the sales growth and a 44.7 per cent drop in the net profit. “Floor space index or FSI sale in HDIL is likely to be the major contributor to its earnings given lower sales,” ICICI Securities said on HDIL. HDIL focus is on redevelopment projects.Analysts expect these projects to pick up in the second half of financial year 2012-13.

Not all companies are expected to show poor profit growth. Companies like Purvankara Projects and Sobha Developers are expected to report a steady to flat growth in sales as their focus is on the fast growing region in South India. Bangalore has witnessed a significant demand for housing and the two companies have remained concentrated most on this market. Kotak Securities expects Purvankara Projects to report sales growth of 25 per cent and a net profit growth of 83 per cent. Sobha Developers is expected to report a flat in sales and a 4 per cent growth in the net profit over March 2011 quarter.

Realty IPOs await a game changer move

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1st of the series

Track2Realty Exclusive

india realty news, india real estate news, real estate news india, realty news india, india property news, property news india, india news, property news, real estate news, India Property, Bombay Stock Exchange, BSE, Real Estate Stocks news, Real Estate Share PricesOnce a happy hunting ground, real estate sector has suddenly woken up to the reality that raising money through Initial Public Offerings (IPOs) is getting harder with investors being lot more discerning today. Track2Realty finds that realty companies have either deferred or cancelled their plans of what could have been collective fund raising of Rs.13,000 crore in the Indian market.

Make hay while the sun shines, goes an old saying. Well, the sun in the capital market was shining over the real estate sector till a few years back and many of the realty companies took a plunge. The oversubscription of many of the realty Initial Public Offerings (IPOs) till 2007 indicated a huge appetite of the Indians to shift from the traditional investment instruments to what was then seen as the sunrise sector. Such was the mad rush for raising money in the capital market that even the realty companies with limited presence in select micro market started launching projects across the country to showcase a pan-India presence.

The global financial turmoil and the stock market crash, however, taught a lesson to the new breed of investors that an asset class without any physical possession may not be the best investment instrument. As a result, while the investment portfolio of average Indians took a major shift from capital market, the real estate stocks could not remain unaffected. In fact, it took the worst beating with stock value of some realty companies even nose diving from Rs.560 to Rs.45. The dramatic turn in the fortune made the average investors stay out of the stock market volatility in general and realty stocks in particular.

It is not just the retail investors whose confidence in the realty stocks took a beating. As a matter of fact, investment bankers maintain that the institutional investors are also adopting a cautious approach when it comes to real estate. This crisis of confidence by the investors in the realty stocks has its own fallout. As per a report by SMC Global Securities, the bad mood of the capital market has led 22 companies, nearly a dozen realty one, to call off their IPOs during this fiscal. Even after getting approval from market regulator SEBI, these companies could not open their IPOs within the valid period of one year from the date of approval due to the ongoing turmoil in the capital market.

Lodha Developers’ Rs.2,500-crore IPO could not meet its opening deadline of January 20, 2011 and thus expired.¬†The study by brokerage SMC Global Securities showed the list of companies that have cancelled or deferred their IPOs include some prominent names, such as Lodha Developers, Ambience Real Estate, Kumar Urban Developers, Lavasa Corporation, Neptune Developers, BPTP and Raheja Universal.

…to be continued

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