Fairval

Notes on Indian equities, sectors and economy

Archive for the ‘Real Estate / Construction’ Category

Sharp jump in rural housing construction

Posted by fairval on January 6, 2014

There is abig time housing construction going on in Rural India, points out a note from CSFB, using the latest NSSO survey as the data source. Number of houses being made per year has shot up sharply in 2009-12 period, over 2002-09 period.  Around 13 million pucca houses were built in this period,

Construction of pucca houses

Construction of pucca houses

As a result, by 2012, 66% of rural houses were pucca houses, compared to 55% in 2009, and 32% in 1993. This seems to be a substantial shift, and could be a result of some of the UPA policies – higher MSP and MNREGA. The much maligned UPA may have got somethings right after all.

Share of pucca houses up sharply

Share of pucca houses up sharply

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Posted in Indian Economy, Real Estate / Construction | Tagged: , , | 1 Comment »

Random Info: Rs 19K per sft at One Indiabulls

Posted by fairval on July 16, 2011

British Council got a good deal. Their purchase at One Indiabulls works out to Rs 18,810 per sft. (this was in 2009)

IPPL has entered into a sale and purchase agreement for the sale of the 15,730 sq ft of space at One IBC at the price of Rs. 296 million (or approximately S$9 million) to Her Britannic Majesty’s Secretary of State for Foreign and Commonwealth Affairs of the United Kingdom of Great Britain and Northern Ireland represented by British Council Division, British Deputy High Commission of the United Kingdom in Mumbai.

 

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A hilarious article in ET post rate rise today

Posted by fairval on June 16, 2011

Housing prices may go up by 5-10% with rising interest rates

NEW DELHI: Housing prices may rise by 5-10 per cent in the next 3-6 months as the cost of funds for developers is expected to increase following the Reserve Bank of India’s decision to raise key policy rates by 25 basis points.

“Property prices are bound to go up in next 3-6 months by 5-10 per cent across the country,” Confederation of Real Estate Developers’ Associations of India (CREDAI) Chairman Pradeep Jain told PTI.  (Note: The man believes property prices go up as interest rates go up!)

Jain, who is also the Chairman of Parsvnath Developers , said the hike in repo and reverse repo rates would result in an increase in interest rates for builders and the same would be passed on to home buyers.

He, however, said demand would not be hit (LoL) despite the expected rise in interest rates on home loans. “People will continue to buy knowing that housing prices would go up further,” he said.

Instead of demand, Jain said supply would be affected, as the increase in interest rates would impact the liquidity situation of small developers.

Asked about impact of the hike in repo and reverse repo rates on the realty sector, DLF Group Executive Director Rajeev Talwar said, “The constant increase in interest rates over the last one year would definitely have an impact”, and suggested that the government initiate reforms to boost the supply of housing.

The Reserve Bank, for the tenth time since March, 2010, raised the repo rate by 25 basis points to 7.5 per cent and the reverse repo rate by a similar margin to 6.5 per cent today.

Echoing similar views, Credai President Lalit Kumar Jain said, “Any increase in the rate of interest will be counter- productive and my fear is that it will give rise to inflation instead of curbing it.”

“… The cost of funding from the developers’ point of view would also shoot up. This will be passed on to the customer, who is already under stress,” Jain, who heads Mumbai-based Kumar Urban Development Ltd , said.

Raheja Developers Chairman and Managing Director Naveen Raheja said: “As the cost of money goes up, the cost of construction and production will also go up. This will lead to further inflationary pressures.”

The need is to increase supply so that demand pressures can be eased and consequently, the prices are curtailed, he added.

Posted in Real Estate / Construction, What was that Again? | 1 Comment »

Sharply polarised FY11, Investment theme gets dumped

Posted by fairval on March 31, 2011

Index return in FY11

The table shows the returns various indices made in FY11 (1 Apr 2010 to 31 March 2011). Note the humongous difference between Nifty and NSE Midcap – a mind boggling 16%.

In sectors, clearly sectors related to investments got dumped, while consumption and export themes did well. The UPA government is hellbent on driving consumption thru large fiscal deficits, while capex goes nowhere. This isnt good. No wonder we have no control on inflation.

Realty is one amazing sector – real estate companies raised equity early in FY11, promptly rigged product prices, saw demand plunge, and underperformed.

Posted in Capital Goods, Data, Markets, Metals, Pharma and Lifesciences, Real Estate / Construction | Leave a Comment »

Real Estate Stocks: Recap of Oct’08 Post

Posted by fairval on February 11, 2011

In the post How Low Can Real Estate Stocks Go, written in Oct’08, this is what was written:

  • DLF at Rs 350, is still quoting at 5x. Its book value is Rs 70. I suspect DLF can come down to Rs 200 if bearishness continues.
  • Unitech, at Rs 108, is quoting at 7x book. So Unitech could come down to Rs 50 or less.
  • Akruti, at Rs 732, is quoting at 5x book. It can come down to Rs 350 easily.

Note all the other RE stocks are quoting at around 2.5x book or less. They will come down to close to 1x book. For example, Omaxe is 1.3x book at the moment. At these levels you could calls some of these stocks cheap, but from what I hear about the likes of Omaxe and Puravankara, these stocks could fall further – to below book. They seem to have eroded net worth.

This is where these stocks are quoting now

  • DLF is quoting at Rs 246. Not quite Rs 200, but getting there.
  • Unitech is quoting at Rs 34
  • Ackriti is down to Rs 206

Now, no one talks of NAVs of real estate stocks. Now, it is back to price to book


Posted in Real Estate / Construction, Valuation | Leave a Comment »

JP Morgan’s report on DB Realty

Posted by fairval on February 10, 2011

This report is as recent as 14 October 2010

We have a Neutral rating on DB Realty with Mar-11 PT of Rs 480 (12x Mar-11 normalized FCF).

The price at the time of writing the report was Rs 435. The price now is about Rs 130. Since then DB Realty has been involved in the LIC bribery scam, and now the 2G scam.

The JP Morgan report also say this —

Organizational build out is happening… with the company hiring a number of expats to build out project management /execution capacity. We believe that many of these professionals have had good experience in high rise construction in middle-east. The company has also engaged Deloitte /SAP for project implementation and monitoring purposes.

Posted in Anal(yst) Humour, Real Estate / Construction, What was that Again? | Leave a Comment »

60% RE development unauthorised

Posted by fairval on January 29, 2010

Interesting quote from KP Singh, the man behind DLF.  (from an interview in The Economic Time)

Is the RE sector now out of the woods?

As I said earlier, there are lots of issues that need to be addressed. Currently, the sector is flooded with unauthorised players. Almost 60% of the total development in the country is unauthorised . This needs to be solved. But you can’t just demolish all those buildings in a day. Also, in the current economic scenario, there is a problem of over-supply of residential and commercial units, which will go on for the next two years.

Didnt know it was as bad as this.

Posted in Real Estate / Construction | Leave a Comment »

China’s Building Market – 50% global share!

Posted by fairval on December 11, 2009

Figures about China boggle the mind. Here’s another one (the second line)-

China has the world’s largest construction market. Over the next decade, China will build half of the world’s new buildings and is currently adding 2 billion square meters of floor space annually.

Currently, 44 billion square meters of buildings exist in China. In order to meet China’s Green Building Standard many of those buildings need renovations for energy conservation. Additionally, it is estimated that by 2020, there will be an additional 30 billion square meters of new construction. This is about 3 bn sq mtrs per annum.

How much is India’s annual building market in contrast? Havent come across a statistic like that. DLF in FY09 delivered 7 mn sq feet (or about 0.7 million sq mtr) of finished area. If DLF has say 0.5% market share in India (random number, but DLF is India’s no 1 building company, it is reasonable to expect a market share of that much atleast), total market may be 140 mn sq mtr. 

So is China’s building market about 15x India’s market?

Posted in China, Real Estate / Construction | Leave a Comment »

Housing finance – some amazing nos

Posted by fairval on December 6, 2008

This is from an HDFC PPT —

CRISIL estimates that in FY’06:
Net Profitability Margins on fresh disbursals by public sector banks (PSU) and HFCs (EXCLUDING HDFC) is negative;
Delinquencies on housing loans for PSU banks at 4.6%, private banks at 2.7% and HFCs (EXCLUDING HDFC) at 5.2%.

Wow! I am sure FY08 numbers were even worse. No wonder the likes of ICICI stopped lending.

Posted in BFSI, Real Estate / Construction | Leave a Comment »

Real Estate Data – the last crash

Posted by fairval on November 25, 2008

Some data which shows what happened the last real estate crash in India.
This time around commercial prices have already mostly corrected 30-50%. Residential prices havent come down so much. Maybe 20-40%. Far more correction is required for demand to revive

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