Indian Real Estate Bulls Hiding?

Where are the Indian Real Estate Bulls hiding ? In my last post I had said, the realty stocks have shed more than 50% in the market meltdown signaling a slowdown and possibly the burst of the bubble. The chart below shows the current stock prices of Indian Realty Stocks as Traded on the NSE at 2:15 PM today.
We also present the 52 week High for the above mentioned scrips and you calculate the percentage fall yourself :-)

• Orbit Corp - Rs 1080 in Jan-2008
• Purvankara Projects - Rs 532 in Jan 2008
• Parsvnath Developers - Rs 594 in Jan 2008
• Ansal Housing - Rs 405 in Jan 2008
• Peninsula Land - Rs 162 in Jan 2008
• Akruti Constructions - Rs 1380 in Jan 2008
• Unitech - Rs 540 in Jan 2008
• Omaxe Developers - Rs 591 in Nov 2007
• IVR Prime - Rs 500 in Dec 2007
• IndiaBulls RealEstate - Rs 840 in Jan 2008
• DLF - Rs 1200 in Jan 2008

Most stocks have lost more than 50%. Unfortunately, the Indian Realty still lacks professional companies and is still under the grip of local politicians and goons.

It is rumored that H.D.Devegowda Family and some local politicians are unwinding huge positions in Real Estate in Bangalore ahead of the state assembly elections.

Realty Companies Advance Tax Sinks

Corporate India continued to pay higher Advance Tax in the last installment ending March-15th, 2008. However, Real Estate Companies like Unitech, DLF and Emmar MGF have all paid lesser than what they did a year ago.

• Unitech Ltd paid just Rs 133 crore which is 59% less than what it had paid a year ago.
• DLF paid no Advance Tax but tried to defend saying it was due to tax planning [Yea right, we BUY your argument that you are exempt from taxes]
• Emmar MGF also paid no Advance tax [Emaar MGF is one of the Worst Real Estate companies in India, which tried to loot Indian public by an IPO, but in vain]

We were the first one to report here about the fall in realty prices. Lower advance tax number has led to the hammering of Realty Stocks on the stock exchanges. SENSEX has fallen by 30% while Realty Stocks have fallen by more than 50%, including HDIL, DLF and Unitech.

Landsharks of Raigarh - Indiabulls + Reliance

World's largest Real Estate scam - The Great Indian SEZs scam has now reached Raigarh in Maharashtra. This SEZ is proposed to be developed by Dalal Street's famous speculators - IndiaBulls Real Estate along with Reliance ADAG's Reliance Infrastructure Ltd. Both the companies propose to build a 6,000 acre multi-product SEZ.

The Mumbai Trans Harbor Link from Sewree to Nahva-Sheva being developed by Reliance ADAG will service this proposed SEZ. According to our insiders, the SEZ is likely to have 2,100 acres of industrial processing area, a commercial area of 900 acres [Office Space, Hotels, Shopping Malls and Entertainment Zone] and a residential area of 1,500 acres.

So in the name of SEZs Gagan Banga and Anil Ambani are all set to send farmers into misery by forcible land acquisition. For 2,100 acres of industrialization these land sharks are grabbing 2,400 acres of Real Estate. Long live the corrupt Indian democracy!!!

Million Dollar Condos in India

New Delhi based Assotech is building India's first Million Dollar Condominium. The project is coming up in Sector 44, Noida and is known by the name Celeste Towers. The two towers [on your left] when completed will be the tallest tower in Delhi NCR.
The tower rise 35 levels and houses just one condo each floor spread over 4750 sft area.

Other amenities include weather heated Infinity pool with spa and private super speed elevator.

More details of the project and cost of condos can be obtained here.

Delhi Residential Realty on Free Fall

A report released by DSP Merill Lynch said,

Visit to National Capital Region of Delhi (NCR) and meetings with property developers, brokers and property consultants reveal that sales volume in the city has fallen by 50-70% YoY. This is much higher than our earlier estimate of about 40% decline. We are also witnessing decline in the sales volume in cities like Hyderabad, Chennai and Bangalore, but to a lower extent.

Most listed developers were selling apartments at an average ticket size of Rs8mn and more (Rs7,000/sq ft and average apartment size of 1,500sq ft). Sales volumes fell sharply probably due to the high prices of apartments, which were beyond affordability levels.

Sales volumes appear to be falling even in other cities like Bangalore, Chennai and Hyderabad. For eg, Hyderabad is seeing a slowdown in sales of high-end properties (sales value of Rs4,000 / sq ft and above) and a few property experts there have also indicated cancellations on earlier sales.

Real Estate downcycle in the near term is inevitable

Most indicators reflect oversupply in near term and possibly medium term Our analysis indicates that

• Momentum for hoarding land is unwarranted,given the execution run-rate of developers and the significant geographical expansion of metros.
• We estimate that demand from IT/ ITES (~80% of demand for office space and ~40% of residential space) over the next 5-6 years will significantly lag the cumulative supply proposed by developers
• Number of Income Tax assesses is still small, suggesting that the emergence of the Indian middle classmight not be as strong as it was projected
  
• A sharp rise in property prices has cooled demand, as shown by a decline in property registrations in a few major cities anda sharp drop in the shift from bank outstandings to mortgages. [Sobha Developers said, they don't see a fall in demand, then explain to me the fall in property registrations in Bangalore :-)]
  
• Without an expectation of interest rates declining and the hazy outlook for IT/ITES sectors, we believe demand will remain weak in the near term
• With supply continuing to ramp up, oversupply in select markets could spread. Developers with an eye on the market cap are hesitant to slash prices or supply. Thus, a downturn seems inevitable in the near term in residential (~70% of the Indian real estate sector)

Your comments and thoughts are most welcome.

SEZ + Labor Migration - A concern

Last month, the Board of Approvals withdrew applications for setting up 8 SEZs in Goa, while the 12 SEZs that had previously received formal/in-principal approval in Goa have been given show-cause notices. The reversal of central policy is the first instance of its kind, and follows widespread protests over the influx of labor migration and the strain on infrastructure facilities. In addition, the fate of 3 SEZs that have already been notified also hangs in balance until the centre completes formal talks with the Goa government. The 3 notified SEZs include Cipla’s Meidtab Specialities, Raheja’s IT/ITeS SEZ and Peninsula Pharma’s biotech SEZ.

SEZs have courted much controversy since the SEZ Act 2005, supported by the SEZ Rules that came into effect in Feb 2006. Protests (notably in Nandigram in W Bengal), have primarily been on
account of protests due to land-rehabilitation policy and resulted in several amendments related to size, processing area, forex earnings and the role of state.

Parsvnath + Ansal Super Luxury Malls

Bangalore based UB group was the first to launch Luxury Retailing concept in India. It didn't take much time for North Indian realty major - DLF to announce its grandiose plans of Emporio. Now its turn for another two developers, Ansal Properties and Infrastructure and Parsvnath Developers to launch luxury malls in metro cities.

These malls will house world class retail brands and will also have amphitheaters, opera shows, in-shop dining and roof-top helipads. Mr. Pradeep Jain, Chairman Parsvnath said,

We will shortly announce our plans for luxury malls in metro cities as their demand is huge. Moreover, luxury retailers are also keen to enter India through a tie-up. The timing is just right for luxury malls in India.

Mr. Kunal of Ansal API said,

We do have luxury mall development on our agenda. With the burgeoning economy, it is quite clear that such niche malls do have a strong market in India. We have already announced a project in Greater Noida and eventually we will look at markets like Mumbai and Delhi.

We all know that luxury Italian brands such as Fendi and Canali operated from 7-star hotels like Taj Mahal Mumbai, thus the need for luxury shopping a destination for super-rich in India.

Bangalore Real Estate has slowed down

Time for some self praise. I used to say in 2007, that a slowdown in Real Estate of Bangalore is inevitable and you can see from the latest Prices [Residential Apartments] released by Cushman & Wakefield here.
The worst hit areas in Bangalore are Electronics City and Banerghatta Road. Prices had climbed to Rs 4,000 on Electronics Road and is now quiting at Rs 2,500. Banerghatta Road has seen prices come down from Rs 6,000 to Rs 4,000. Poor infrastructure and absence of planning will be the biggest bottleneck.