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Indian Real Estate Stocks Bite the Dust

By: Property, Fri Jun 16th, 2006 06:09:48 AM

No longer the market favourite, property stocks have misplaced their shine, as real estate counters lost 20 - 70% since 10th May 2006, when the Sensex was at its peak level of 12,612. And, if that were not all, Unitech, Patel Engineering, Adnani counters including others locked in investors by hitting their lower circuit filters regularly during opening trade, especially investors wanting to exit these counters. Already, the words land bank are fast becoming indicative of a bubble, and the biggest problem is how does one value the land, a question that needs clarification as far as the Indian land bank is concerned.

The stock prices of listed real estate companies have taken a considerable beating, but for the first time in 3-years, property prices have begun to cool down in metros and mini-metros. Some of the prominent cities where real estate prices have started to look downwards due to the stock market tumble are: Surat, Pune, Ahmedabad, Nagpur, Mumbai and Bangalore, among others. There are property brokers in Surat and Ahmedabad claiming, property buyers are negotiating rates downwards, most of whom are equity market players. And, new and old residential properties have already begun to witness a slack in prices and the number of deals being made. HDFC Venture Capital Managing Director and CEO, K.G. Krishnamurthy says: “Price levels of commercial buildings were clearly through the roof. Therefore, it definitely had to come down.” However, he believes a correction in land values will happen in the coming six to nine months. “What could bring down real estate prices is the correction in TDR rates, which the government will announce next week.”

This does not mean Indian real estate has lost its glow, the stock market tumble has led to buyers trying to force the price down, but ere long it will regain its former fizz, and the battle over land will ensue, afresh. For those with land investments, the advice is to hold off selling till real estate has re-captured its former value. For end-buyers, buy now while you have a chance to force down the price! Up or down, that is the nature of real estate prices, buy when the prices are low, sell when they hit the roof!

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