Monday, June 2, 2008

Indian Real Estate & Global morons

There is no denying the Real Estate "industry" is feeling bouts of anxiety at the moment..and most confess their nights are devoid of soothing sleep( leave alone libidinous heroics which came to mark the recent bull market fueled sexual self image.. again Real estate is mostly a male game).
The fawning "investors" who bought their stories, the bankers who fought to finance the mega mall in the boondocks, the PE funds (in fact, the only believers left now..but more on that later) who saw astounding opportunity in realty sector, the financial media who astutely understood why the stocks were going up and what was getting "unlocked" or could be "land banked", the Govt who ensured interest rates and loans were available to all and his milkman to speculate (ok.. invest) in real estate.. all these worthies seem to be now developing cold feet just when the Real Estate promoters are in Real need.

Day after day, the Industry "promoters" with millions of sq.meters under development or construction and little cash in their tills(or their horizons) explain, project, and plainly pontificate the "temporary" nature of the slowdown in "deals" but prices barely having moved downwards as a sign of doNotSeeSignificantCorrectionInPrices theory validation.

Now, we at Luddic Research know better than to pit our wit against such fine gentlemen(again, all male) who have shown exemplary leadership in setting new standards for most third world benchmarks of foresight, financial projections, corruption, bribery, political funds'(politicans') investment, strong armory and last but not least of bringing tons of unaccounted money to "constructive" use.
So when these exponents project unlimited pots of gold at the end of Indian realty rainbow, we ( never fight the market ) just happily hold on to our stocks in the certainty ( at least in the mornings) that this is the bottom today and surely cannot go any lower ( only last night the analysts on CNBC were saying value has emerged in most bigger and reputed Real Estate companies and valuations are realistic, blah,blah.. and they know what they are talking about) ..surely soon we will be back to our original purchase price!!
Consequently, Luddic Research has also been strongly advising all clients to hold on to their property investments (even if no buyers today or in our analysts' horizons) and not reduce asking prices even though there will be no deals.. you don't want to send a wrong message here. We are of course aware of the pressure some of these fine "investors" are feeling from their lenders, bankers and families but as history is witness prices never come down in India and there is too much know it in your gut.. listen to your gut..remember your middle name is (now) "long term".

We have to admit despite that our sunny outlook (and the recently hired hypnosis expert) and positive sounding prognostications administered in religious sessions and sermons (through TV acclaimed God men and astrologers) that we are holding across the country for our investors.. we have been largely unsuccessful in getting new suckers into the wonderful ponzi scheme that the Indian Real Estate was shaping into lately.. but we are proud to have held up the prices and stem any wayward "distress" type sales amongst our flock. They chant every morning(at our sessions) ".. I am LongTerm..I am LongTerm..I am LongTerm..I am help me Lord."

No discussion on Indian Real Estate is complete without the mention of the foreign hand..this time the sharp and naturally gifted foreign investment houses and hedge funds who swarmed the globe for "stories" and "plays" and identified this sector as the next boom sector where the demand supply projections, a variety of growth stories and entrepreneurial libido with minimal ethical and legal inhibitions promised to change the rules of the game or even the game itself.
It was a no brainer for the youngish crowd of over achieving and over reaching opportunity spotters from the US(primarily) and the EU,Asian wannabes, to start throwing cash and valuations (of course based on sound projections, though have to confess a little scary rosy) at these roperties, builders , construction companies and Land banked corporates that the entire Real Estate sector sat up, rubbed their eyes disbelievingly and changed their world vision (and self image) for ever .. to the extent of mostly abandoning even the time honored custom of the afternoon siesta the Industry has enjoyed for generations.. there are too many PE types wanting to discuss a deal with them..even in that afternoon slot.. though lately the meetings are not as enjoyable as the PE boys are trying to broach (cautiously ..they know the "staff" outside looks a little muscular for good reason) uncomfortable topics like revaluing downwards and how to exit options .. but mostly these fine boys are the last believers .. at least on the face of things.

As some wizened old hand, who doesn't like emerging markets much, said.. ".. only the locals make money in the these markets..foreigners make it and then give it all back .. never can take out the profits.." but then like we all know this time is different in India.

Me.. I just take the opposite positions to Luddic Research' clients .. someone has to provide the liquidity (and this explanation is fine with SEBI..we love third world regulators).. and I'm too shallow for Long Term thinking.

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