Sunday, April 20, 2008

Indian Real Estate is Realty Challenged.

Things became a little clearer this week. Parsvnath Developers' Pradeep Jain finally gave us a glimpse of the awesome intellect that has become the hallmark of the Indian realty sector and how they are in a fine position (hormonally) to see far beyond what ordinary mortals.

Increasingly these Quixotic Visionaries have had to battle the previously discussed bovine behavior and lack of faith from the very investors, lenders, buyers and general countrymen who will benefit the most from their vision and tireless efforts to "develop" this country.
In today's article , you can understand the sheer frustration that would have prompted such an appeal from the usually stoic Builders and Developers who have worked tirelessly and selflessly to give a roof over the heads of fellow Indians. Just when they were warming up to really and seriously house a serious number of families, their offices, their malls, they seem to be buffeted from all sides by vested interests and other such out to exploit them.

First, their stocks get hit by negativism.. 50-70% down and all the money spent on propping prices and buyBacking own shares is more or less vaporised.
Second, just when they were irreversibly invested and partly built on 1785 different projects spread throughout this country (A,B,C,D,E,F,G and some even O class cities ) the ponzi pyramid of bigger fool iterations hits a speed bump.
Third, their Bankers, who could usually be relied upon to volunteer as bag holders when everyone and his mother-in-law were finally getting wise and wanting out, were suddenly under orders to cut lending to this sector and would not budge no matter how much you "revalued" your "land Bank" to offer bigger collateral.
Fourth, the traditionally growth(and cloth) inclined finance minister ,who only last month was brow beating the banks to lower interest rates seemed to have been reined in by the opposition Parties (and own Party) to either attend to Inflation or dress in proper trousers and quickly dropped the lower interest plans..leaving the highly leveraged Realty sector facing new reality.
Fifth, the retail investors and locals(native Indians) who had been heavily relied on to act as the bigger fools in the past, were now showing their true colors as fair weather friends and refusing to up the ante (or even take the bag from some poor speculative "smart money" caught when the music stopped)..the point is if the local(who actually wants to live in the property) is refusing to take the bag at this price .. a lot of definitions need to be re-looked at.
Last and not least, it emerges today the cement and steel prices have risen to unplanned and unprecedented heights. This has just come as a total surprise(as the industry had projected flat or lower prices till year 2020) and looks very suspicious, to say the least.

Any other industry and the captains would be at a loss to figure out what happened, but these Construction Leaders quickly deConstructed the mysterious price escalation to cartels in the steel and cement sectors .
Why we are taken in by the sheer brilliance of this Industry's stalwarts is the raw intellect and vision that tether such insights. Not only did they identify a cartel in steel but also in cement and thus reached the same conclusion as our venerable Finance Minister independently.The FM who'd been sulking having failed to get banks to cut interest rates, jumped onto price controlling the nation into growth with gusto as the cement/steel sectors provided familiar whipping boys.

Further evidence of why our country's future development is safe in the able hands of the Jains , Agarwals and Goels("promoters" all) crowding the realty space rather than whimsical outsiders , can be seen in clueless observation of Cushman & Wakefield -

“With the exit of speculators from the residential market, the transaction volume is down by almost 40%."
Whereas, our trusted visionary Pradeep Jain's much more faith inspiring ( and frankly heroic) but well grounded opinion that I'm much more likely to buy -
Asked whether the industry was witnessing any slowdown due to high interest and inflation, he said: "There is no slowdown. I do not think there is any softening of prices." Softening of prices is next to impossible as input cost, interest rate and land prices have increased substantially, Jain added.
Also, further evidence of the amazing potential this sector offers is offered in the multiple PE and "smart money"and other smart manager driven funds which are unflaggingly buying up whatever they can in the Indian Real Estate space based on year 2025 earnings, at the time of writing .
In fact Parsvnath( getting a little obsessed here) , no slacker in such matters got hold of one such "smart" money bags Saffron Asset Advisors UK.. to dump some good stake on him.

Finally, we hear the astute National Real Estate Development Council (NAREDCO) identified a disturbing new Cartel of Buyers who are conniving to drive the Property prices lower and take unfair advantage of the Council's members..and took their findings to the (champion of the downtrodden) Finance Minister who immediately promised to look into the allegations and take strict action against all found guilty.

2 comments:

Manish said...

man, i'm bummed it took me forever to stumble upon this blog. Great stuff...i call it financial comedy. The guys at Parsvnath just make me laugh. DLF is also a good sideshow to watch.

Natalia said...

kindly, update me on the same asap.
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Natalia
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