Friday, October 2, 2009

CONTRARIAN APPROACH IN REAL ESTATE


17000 sensex and every ones to make most out of it. Now it’s the turn of Real Estate companies.
Realty companies are in the mood of mopping up some more . In the last six months the stock market has attracted a host of large real estate firms to tap the IPO route. Together four firms — Delhi-based Emaar MGF and Ambience, Gurgaon-based developer Ambience Ltd, Lucknow-based Sahara Prime City, and Mumbai-based Lodha Builders are eyeing to raise Rs 11,100 crore from the market.
Real estate fortune environment today is much different than it was in 2005, 2006 or 2007. The volume of investment sales is down massively. The biggest issue going forward is that the industry needs to continue to take stock of just how aggressive things got in the 2005 to 2007 period and eventually deal with the repercussions. Aggressive pricing, long interest only periods, shoddy underwriting and net operating income rental projections that now look like pure fantasy all combined to produce financing packages that will create problems. The prices of real estate came down like a plane crash. Property prices doubled in the two years after India eased rules in early 2005 on overseas investment in its construction industry, partly fuelled by interest from foreign investors. Moreover property sales are not only down more than half from a year ago, but developers are piled with unsold and incomplete projects.
Banks have become much more stringent about the debt they are giving out. The borrowers that will survive will be those that can adjust to the new market. That means putting more equity forward.So at these moments one can reap the benfits of doing investments in real estate IPO.The real estate market is very much down to earth and invested in a CONTARIAN APPROACH will benfit in the long run.

Foreign investors, scarred by the global sub-prime crisis, are wary of investing in a property market beset with red-tape, land disputes and unclear titles. And with no clear sight of prices bottoming, like home buyers, they are staying away. Major developers, who have seen their share price slide by up to 90% from last year’s peak.When Lehman brothers and other banks failed in 2008 the funds those were supposed to come from them got stopped as a result the entire production of real estate went into tailspin.

In an bid to generate cash flows, developers are frantically cutting costs, re-sizing apartments and redesigning projects, but have not been able to significantly change buyer sentiment. Investment peaked in 2007, with Indian real estate firms raising 151.85 billion rupees through local public offers and another $2.1 billion from foreign funds. So Real Estate now wants to clock the rising market sentiment. IPO will reduce their debt burden and will reduce the dependence on foreign inflows as compared to 2005.2006 and 2007

In the global foot we find that Housing markets in several developed countries around the world are showing signs of a tentative but growing stabilization. Real home prices increased in the second quarter in Canada, Australia and the United States. While house prices continued to fall in the United Kingdom, France, Spain and other countries, the pace of decline slowed, the bank noted.
In the coming days Indian Govt is drafting a bill to form a real estate regulator that will protect the interest of real estate sector.

So if the investors wants to make investment plans in IPO of Real Estate then they should invest. Two prime important factors behind such a move,1)The funds raised via IPO will be invested 100% along with efficient management process since they are already faced the dark side of cost of borrowings and other financial problems and 2)IPO valuations are designed in such way that investors will make money out of them.

Investors should choose the IPO of good profile, fundamentally strong, with strong order books. Since only these will enhance your investment return in Real Estate IPO and sripts.

0 comments:

  © Blogger template 'Minimalist H' by Ourblogtemplates.com 2008

Back to TOP