Affordable Housing - the opportunity


(Tushar) #122

Seems HDFC mutual fund got some inspiration from this thread.


(malayruparel) #123

https://www.linkedin.com/pulse/affordable-housing-making-indian-sub-prime-crises-kolagotla-cfp


(Bheeshma Sanghani, PhD) #125

Some important approvals now included in the right to service act. Commencement certificate, plinth checking , occupancy cert and tree NOC.


(gautham1) #126

hi @narayanaov . thanks a lot for this data. I am surprised that final cost is only 74 lacs. Out of which 10 lac is lift which is not a necessity. So its just about 64. I always thought it would be much more. Can you tell if its a mass market budget construction or premium?. Also, what is this 6 lac approval. You mean registration?
One more query. How is the real estate market in Bangalore? I am not talking about apartments. But individual house/land inside the city. In the net we keep hearing that no transactions happening, its a buyers market etc. But the ground reality seems to be different. The demonetization hasn’t had any effect. Only good thing is that, sellers are ready for full white transaction.


(Veera) #127

Hi @gautham1. I agree this cost of 64 was on lower side due to stringent control of cost and material wastages. We have separated labour contract and managed on own for material procurement. This was single house build with decent quality of materials. Yes, 6 lacs was business cost of approvals for Electricity, Water, Sewage, and other necessary amenities for the building.
Based on my interactions with agents / brokers, the market is not severely hit by Demo and sale transactions are active in individual houses. I heard of at least 3-4 sale transactions with ticket size of around 2-3 Cr closed in last 2 months. Of course, I still sense lot of desperation from Agents to close the deals.
I agree that sellers are sinking that option of taking full white and looking for creative ways to take partial white.


(gautham1) #128

thanks a lot @narayanaov . Thats useful. I too have come across a some > 2cr transactions in the last couple months, which is complete opposite to what we hear in net.


(Jose) #129

Can HDIL be a beneficiary of the affordable housing theme? They have huge parcels of land in and around mumbai and have been trying hard to monetize it,but in vain.recently they have come out with a affordable housing theme at mulund by the the name nest and is said to be having very good customer response.As per the company they have received bookings for more than 85% of the project launched.Their price/book ratio is only 0.25.Even if one consider affordable housing to be just a asset monetisation exercise with very little margin ,it can be hugely attractive for a heavily debt laden company .Recently in Nov ,Morgan Stanley bought shares in the company
making it more attractive.
Key risks:
If you go through the review sections of the Various properties of the company,customers have given a serious thumbs down. Handover delays,inferior materials are some of the issues cited and numerous dealings of part payments in cash only.
Central bank of India has taken symbolic possession of some of their properties ,if the issues are not sorted out immediately they will not be any sales in these properties.and similar issues with Andhra bank and Union bank.
FIIs have entered in the company previously too and has exited with loss in numerous times.
But any proper settlement negotiations with the banks could be a huge positive,their debt too have come down in previous years.
.At a cmp of 65,if you consider the risk reward ratio,reward seems greater.
Kindly correct me in things where I have gone wrong

Disc: not invested ,tracking closely as an investment opportunity


(Mridul) #130

(Susindar) #131

Not all bad news as NPAs between 5 Lakhs and 25 Lakhs fell over prior year and overall NPA for HFCs was only 0.6%. Banks performed quiet bad here too.


(Kumar Saurabh) #132

One correction , it’s PSU banks I think not all banks


(MHS) #133

(BGattu) #134

LTCG aside, I think surplus money in the hands of rural India through 150% MSP and health care would be very good for affordable housing. First thing a rural Indian would want is a better house. Projected affordable housing NPAs in rural India would ease with more money, after all repossession of a house is very prestigious issue in rural India.


(initin) #135

Hi, Bgattu

I think new MSP = at least 150% of the cost of production.

Thanks


(BGattu) #136

Yes, that would put more money in the hands of farmers compared to today’s MSP and avoids the farming distress (minimum 50% profit is now guaranteed). Once the health care is implemented it would also save money. Assuming inflation is within limits, I think it is a positive for affordable housing.


(SSK) #137

The International Finance Corporation (IFC) is planning to invest upto $75 million in L&T Housing Finance Company (L&TH).


#138

huh! and I thought affordable housing loans were no brainer. These so called affordable housing loans have created hole in few companies I track e.g. Manappuram, Motilal etc.


(Jose) #139

This is a true fact that the nbfc s especially the new ones will only get a pie of the riskier assets while venturing into affordable housing ,but most housing loans will be given only with a margin on the cost of construction. Eventhough the asset slips the chances of recovery are very high as the cost of land would act as a cushion.


(Vaib9619) #140

Anyone having new CLSA report on Housing?


(Bheeshma Sanghani, PhD) #141

A report based on primary research data on residential real estate as far as Pune is concerned can be accessed at http://www.gera.in/media-room/pune-residential-real-estate-reports

Disc - Me and my team collect and collate the data which goes into the making of this report

Best
Bheeshma


(Bheeshma Sanghani, PhD) #142

Interesting to see the emergence of large marketing & sales focused cos like anarock (founded by anuj puri - ex JLL).