The real-estate sector in the metropolis seems to be heading towards the trend observed in 2008-2009 during the slowdown
Mumbai is expected to report lesser volume of real-estate transactions over the next six months, according to industry experts. The fourth quarter results of the last fiscal are also reflecting the lower sales trend in the realty segment. In fact, we may see a repeat of the scenario witnessed during 2008-2009, when the slowdown had severely impacted the real-estate industry.
If the current trend continues, Mumbai will soon see stagnation in property sales. Prices of various real-estate properties—both residential and commercial—have shot up by 30% in a few pockets of Mumbai over the last quarter.
“Post the recession, the increase is volume that you had seen will subdue, because in certain segments, prices have increased by 30%-40%. We are going to see lower volumes of transactions in the next six months compared to the last six months, if the prices do not come down,” said Pranay Vakil, chairman, Knight Frank (India) Pvt Ltd.
“For the first quarter of this fiscal, prices have gone up further by 15%-20%; we are estimating sales to go down further by 25%-30% ,” said Pankaj Kapoor, founder, Liases Foras.
“We need 20%-25% correction in prices to bring back the momentum in the market,” added Mr Kapoor.
“The prices of properties might not see a rise till September and we expect a slowdown in sales during the next quarter due to rains and holidays. But going forward, by October, we shall see a price rise by 10% as we approach the festival season. Usually during that period, the sales pick-up and demand comes back to the market,” said Mayur Shah, chief sales-business unit, Ackruti City Ltd.
The scenario in New Delhi also looks depressing for homebuyers. “Prices are going northwards. They are likely to increase by 10%-15% in the next six to nine months’ time," Parsvnath Developers chairman Pradeep Jain told the media in New Delhi.
Vijay Wadhwa, promoter of the Wadhwa Group, had told Moneylife earlier, “As the situation improved (after the slowdown), developers slowly increased the prices of properties by 10%-15% to cover their losses. But a few of them spiked up the prices over 25%, due to which they failed to report good sales figures.”
With the current scenario in the real-estate industry, will buyers be priced out of the market?
ARSS and Jubilant outshine in 2010 while Edserv Softsystems and Mahindra Holidays, listed in 2009, are still on a rollercoaster ride
The year 2010 has seen a spate of IPOs from companies trying to cash in on the booming stock markets and more than 20 companies have filed their red herring prospectuses with market regulator Securities and Exchange Board of India (SEBI). While some of them have burnt investors’ fingers, others have something to cheer about. As on 16 April 2010, 27 companies have entered the market this year including follow-on public offers (FPOs) from public sector utilities NTPC Ltd and Rural Electrification Corporation Ltd (REC). Among them, 16 stocks have left something on the table for investors when compared to their issue price while 11 stocks are in a freefall. From these, the top 10 performing stocks have gained an average of 56.42%.
Two IPOs have yielded more than 100% returns. These are ARSS Infrastructure Projects Limited and Jubilant Foodworks Ltd, which jumped 158% and 119% from their issue price. ARSS was issued at Rs450 while Jubilant was issued at Rs145.
Aqua Logistics Ltd (73%), Birla Shloka Edutech Ltd (41%), DQ Entertainment (International) Ltd (32.19%), Man Infraconstruction Ltd (27.78%) and JSW Energy Ltd (27.74%) are trading well above their offer price, as well.
In the year 2009, 18 IPOs hit the market. Out of them, eight stocks are trading below their issue price while the balance 10 are trading above their offer price.
Edserv Softsystems Ltd, which debuted on 2 March 2009 at Rs60, has shot up 249% at Rs209.10 as on 6 May 2010. Interestingly, the Edserv IPO was graded 1/5 by ratings agency CARE.
Mahindra Holidays and Resorts India Ltd, which was listed on 16 July 2009 at an issue price of Rs300, is up 58%. It closed at Rs473.05 in yesterday’s trading session. Cox & Kings (India) Ltd has also given a decent return of 42% from its offer price of Rs330; it closed at Rs468.15 yesterday. Similarly, Pipavav Shipyard Ltd has surged 41% at Rs81.95 from its offer price of Rs58. The BSE Sensex is up by 95% since March 2009.
Rishabhdev Technocable Ltd has disappointed investors the most as it dived 73% from its offer price of Rs33. The stock closed at Rs8.81 on the BSE today. Euro Multivision Ltd (-66%), Raj Oil Mills Ltd (-50.33%), Excel Infoways Ltd (-43%), Astec LifeSciences Ltd (-31%) and Indiabulls Power Ltd (-33%) have slipped from their offer prices of Rs75, Rs120, Rs85, Rs82, and Rs45, respectively.
International cues will continue to weigh on local bourses, but expect a rally on Monday
The market was down taking cues from the global markets; however, gains in the Reliance Industries (RIL) stock limited the plunge. The BSE Sensex was down at 16,769, lower by 218 points while the Nifty was down at 5,018, lower by 72 points. The bourses started the day with a sharp plunge. They were highly volatile in the morning session on the swing of the RIL shares when the verdict of the Supreme Court was going on. The market rebounded in the early afternoon session and traded in a narrow range for the rest of the day.
Asian shares were down in choppy trade taking cues from Wall Street’s closing on Thursday and on concerns that Greece's debt problems could spill over to other weaker European countries. Key benchmark indices in China, Hong Kong, Japan, Indonesia, South Korea, Singapore and Taiwan fell by 0.16% to 3.1%. US stocks plunged 9% in the last two hours of trading on Thursday before paring some of the losses, as a suspected trading glitch and concerns over the credit crunch in Europe bogged down markets. The Dow suffered its biggest ever intraday drop of 998 points.
The massive intraday slide was rumoured to have been caused by erroneous trades reflecting the value of some shares to nearly zero. The Dow dropped 347.8 points, (3.2%) to 10,520 at close of trade. The S&P 500 fell 37.75 points, (3.2%) to 1,128. The Nasdaq lost 82.6 points, (3.4%) to 2,319. The European Central Bank will hold a conference call with commercial banks later on Friday to gather opinion on the state of money markets in the wake of the Greece debt crisis. Interbank lending rates are rising over the recent weeks on the intensification of the crisis despite the ECB's recent promise to provide banks with unlimited liquidity until at least mid-October.
Closer home, exports were down 4.7% in FY 2009-10 on the back of the global economic slowdown. However, India is targeting an export growth of 15% in the current fiscal. Aided by government help and the low base effect, India’s exports have been in the positive zone in the last five months after a straight 13-month decline.
Foreign Institutional Investors (FIIs) were net sellers yesterday offloading stocks worth Rs937 crore. On the other hand, Domestic Institutional Investors (DIIs) were net buyers purchasing stocks worth Rs379 crore. The rupee recovered in the afternoon, trading in line with some recovery in the equity market and the dollar’s loss.
A three-member Supreme Court bench headed by Chief Justice of India K G Balakrishnan ruled in favour of Reliance Industries by 2:1. Supreme Court judge P Sathasivam declared that the brothers' Memorandum of Understanding (MoU) was not binding and that RIL and Reliance Natural Resources (RNRL) must renegotiate the MoU in six weeks. Justice B Sudarshan Reddy then delivered the dissent to Justice Sathasivam's verdict. At the end of both verdicts, the Supreme Court ruled in favour of RIL by 2:1. RNRL plunged 22.9% after the verdict while RIL was up 2.4%.
Ramco Systems (down 5%) has received an order for its human capital management (HCM) and payroll management solutions from Dubai-based Tradeline LLC, a trading and manufacturing group.
Crude was down as concerns over the Greece debt crisis and the weakness in the global equity markets dragged oil prices down.
Hindustan Copper (down 6.9%) was on a rally yesterday on the news that the company will come up with a follow-on public offer (FPO). However, it pared its gains today.
Realty stocks extended recent losses on fears that the Reserve Bank of India (RBI) may resort to further monetary tightening to counter soaring inflation.