Real Estate: Mumbai In Agony
Lok Housing, Godrej Industries, IB Real, Century Textiles, Bombay Dyeing, Orbit and HDIL-all Bombay based Real Estate Developers have been hit by slowing demand since the beginning of CY09. The softening trend is sustaining and we would most likely see Real Estate price cuts in CY10.
A visitto the office of the Deputy Inspector General of Stamps and Registration has confirmed fears of a deep drawn slow down in real estate demand in Mumbai.
Data of stamp duty registrations shows sales volumes so far in FY09 are down 14% yoy and 33% lower than in FY07. Volumes for August 2008 were down 27% YoY, the steepest fall in any month this year.
Mumbai has traditionally been the strongest property market in the country – and we believe that the above evidence is highly indicative of the state of property markets across the country.
Developers appear to be holding prices in the hope that demand will revive during the festive season, and residential prices in Mumbai appear to have risen marginally since the start of FY09. Despite this, reports of developers offering direct and indirect discounts on projects are becoming increasingly frequent implying that a price correction might be just round the corner.
The trend of slowing volumes to continue going forward, leading to price cuts by developers post the festive season.
The end of Fads, just like the Replacement Cost Thesis propagated by Harshad Mehta in 1992, the NBFC Fad of mid 90s, the Tech Bubble of 1999-2000 were followed by massive stock market falls as investors vanished form the sectors concerned.
It is highly possible, that the current series of falls in the Real Estate segment is just the beginning of a deeper slide and the aforementioned concerns too, will never be able to capture peak level market capitalisation.
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Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.
Nothing in this article is, or should be construed as, investment advice.
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