Real Estate (cycle) - Will pessimism give birth to multibaggers!


(Savishesh) #21

Market capitalization of largest Pharma Company is more than Combined Market Capitalization of all Listed Real Estate Companies !!! Something really wrong


(sharrmasks) #22

With so many unresolved and seemingly unresolvable issues, it looks to continue the same way.


(desi.investor) #23

The thoughts are very sound but underlying reality is not so great. If you are considering that low inflation will pull out money from the pockets of investors and people would start buying, it seems very unlikely as if inflation indeed is slowing so as the growth too. Moreover macro factors will also contribute to the Indian growth and thereby Real Estate cycle.

We should consider previous cycles too as to how industry is going through fundamentally. The bust of 2008 is still looming for real estate sector as there are still many ghost cities in India which had no buyers. In the area where I live in Jaipur, there was once boom 3-4 years back as everyone who wanted quickbuck was building real estate to sell, the result was a housing glut and there are many housing projects which are either stopped due to fund squeeze or due to no buyers. I assume so are the factors in other cities too which means that market is still left with previous glut and they still are facing the problem in selling. So real estate construction boom is pretty much unlikely in next 5 year period.

Stocks might be getting excited by the flashy headlines in websites and newspapers but they are to be taken as just rumors… It seems you are getting too much excited by it too.


(Bheeshma Sanghani) #24

Real estate in India is a play on land since it forms a major component of the raw material costs of a developer. India supports 18% of the worlds population on only 3% of its land. That is the real moat. As the population increases the moat will only widen. China in contrast has 3 times more land while supporting 20% of the worlds pop. India is unique in its land to population ratio and those owning unencumbered land have a solid advantage.


(neeraj610) #25

You forget that 2/3rd of chinese land is extremely inhospitable. Not taking this into account creates distorted analysis.


(Bheeshma Sanghani) #26

Thats why perhaps there is massive property price appreciation in china. Chinese property prices are always in bubble mode.

https://www.ft.com/content/6881e446-0d4f-11e7-b030-768954394623

I don’t have a precise estimate of the % of land that is habitable & uninhabitable between china and india - an interesting breakup of the landuse patterns can be found here - https://en.wikipedia.org/wiki/Land_use_statistics_by_country

My general point is that india is unique in terms of its land to population ratio. perhaps the %'s may change if you factor in habitable, cultivable, arable land etc. But the general point remains. Its an ever expanding moat.


(neeraj610) #27

Sure. Another data point: if all of India were to be housed with the population density of New York, everyone would fit in Haryana!


(kashif kidwai) #28

http://latticework.com/indian-infrastructure-a-decade-in-the-making/

Rahul Saraogi making a case for real estate and infrastructure in India.

I agree with both the points of view on real estate. As some of the posts have alluded to, there is indeed an overcapacity in real estate sector currently. Additionally, the rental yield in India is pathetic when compared to developed countries. Finally, the real estate prices continue to be out of reach for a lot of us and affordability is a real problem. At this point there is quite a lot of pessimism and it does seem like there is no light at the end of the tunnel.

However, the same pessimism gives rise to the conditions for the next recovery. Real estate is a cyclical sector and the next recovery will follow as surely as day follows night. When will the elusive recovery come, unfortunately nobody can predict. It might take a further 2-3 or even 5 years. But in my opinion the time is right to start building the real estate portfolio. Because the recovery whenever it comes will take everyone by surprise.


(Bheeshma Sanghani) #29

There is a lot of hate in real estate. The customers hate the builders because of all the false promises made and broken. The builders pretend to like their customers but they also hate them. The govt hates the builders and taxes them indiscrimately and the builders hate the govt for not giving approvals on time. The banks also don’t like customers and don’t pass on interest rate reductions to them. The builders don’t like banks because of the high rates for construction finance. It is this atmosphere of mistrust and hate that needs to change amongst all the parties in question and as Charlie munger says there should a seamless web of deserved trust. This is a sector ripe for that.


(Vijayk) #30

Absolutely right… However, the sector may take another 5 years to bottom out… Patience for 10 years may be needed here… By then 3D printed homes may be a reality and winners may be different from current players. New disruptive players possible here


(Bheeshma Sanghani) #31

Personally I think that with a strong law to ensure fair treatment most of the issues of the past should go away. The Rera if implemented in letter and spirit is a serious game changer for the realty sector. I am eagerly waiting for its implementation


(kashif kidwai) #32

http://www.morningstar.in/posts/39801/6-major-trends-for-indian-real-estate-in-2017.aspx

I agree. I think the ground is getting laid for the next recovery. Lots of action happening in the right direction including the RERA, REIT, focus on affordable housing etc.


(Bheeshma Sanghani) #33

When looking at real estate esp in India one must look at the loading% and extra charges apart from the price per sqft. The net effect has been that the actual carpet area that you get to use has reduced dramatically and the extra charges have increased. While the price per sqft has remained flat or decreased the overall cost of the unit to the customer has increased over a period of time thereby developers have been successful in passing on price increases. Also practicing a joint development model between the developers and land owners is the new norm because of the tremendous increase in land prices and the rule in rera which stipulates that land owners are equally responsible to deliver the project to the customers on time. All these steps are in the right direction and as the level of trust improves between customers and developers ( which is at rock bottom now and can’t get any lower in my opinion ) so will the sales situation and profit margins. There was never an issue with demand the problem was with trust. When trust returns via the implementation of rera I am certain that realty stocks will get rerated in a jiffy. Housing is a basic need after all.


(Kumar Saurabh) #34

I think one must check prices since demonetization when market declared dooms day for real estate. Some of them 40-50% up post 20-30% fall during demonetization.Though this sector is full of fraud promoters, there r few good one with good governance practices . Disc : Holding Ashiana housing, Kolte Patil and Arvind Infra from last 6 months and accumulated during demonetization


(Vijayk) #35

instead of checking stock prices- which is a function of sentiment- one should check real business…talk to few real estate brokers, buyers, and sellers in the market…stock prices go up 50% and down 50% for no reason (only sentiment change) SBI has moved from 150 to 270 in one year- with no change in underlying fundamentals!


#36

I am from Hyderabad and visited SBI HOME LOAN center (RACPC) on work. Surprised with crowd today. As per manager, highest number loans disbursal in a day(180). Looks (real estate) sector is turning around.

Disclaimer : Sector allocation 37% of PF, my views may be biased.


(ramanhp) #37

Interesting. Can you share which real estate companies you are betting on?


#38


(ramanhp) #39

Thanks. I held and sold Godrej Properties. Now looking to invest in Anant Raj and Ashiana. Do you have any note on Anat Raj? Could not find much information on their projects. I believe that real estate companies operating in non-metro benefit from a real demand and affordable housing profile.


#40

I have some 2 year old reports. Please treat them as information only . I thought of opening a thread but looking for more data. 20150806_Anant-Raj-Industries-Limited_1115_CompanyUpdate.pdf (307.4 KB)
IDirect_AnantRaj_MgmtNote.pdf (180.4 KB)