Has the Realty Sector Bottomed out ?

Discussion in 'Ask A Query About Your Stock Picks And Portfolio' started by shakti khanduri, Oct 15, 2015.

  1. shakti khanduri

    shakti khanduri Active Member

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    There is lot of noise in the market to this effect. Is it true ? I would like to have members opinion on this issue. My opinion is- It is yet to see the bottom.l am big picture thinker. I hope to see the bottom out when there is fear in the market to invest in Reaty Sector. I still find investors following RJ,Sanjay Bakshi,Nilesh shah,Porinju Veliyath etc when they recommend Realty Secror scrips.Of course, there is selective buying but that is because many names of this sector have been exposed because of many wrong doings. Exposed Wrong doers of any sector will face difficuty in getting investors.THUS THRE IS SELECTIVE BUYING. BUT NO FEAR.HENCE NO BOTTOM OUT.Of course it is NOT in BULL PHASE run either.
     
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  2. Carl Icahn

    Carl Icahn Active Member

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    We wont know whether the sector has really bottomed out until much later when the stocks start flying to new highs. Then, we will look back and point to a time in history when the market did bottom out. It is the same way with multibaggers. You wont know it is one until after the event. So, one has to by his own instincts to a great extent.
     
  3. Vinit S.

    Vinit S. New Member

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    It's really difficult to comment that Realty Sector has bottomed out or not...but...but there is hell lot of activity gng on much higher level for which we wont know anything...
    Reality sector is of totally MANIPULATED SECTOR (Everyone knows & No One knows). To have indepth knowledge about inside activities, you have to be good books of Management...rest what to say...u may follow those INVESTORS, if they are profiting 100% in any stock then atleast you have chance to earn least 30% - 50%...so good luck with your decisions...

    Vinit S.
     
  4. Sanjay Kumar

    Sanjay Kumar New Member

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    my 2 cents on this.

    So there is a lot of stagnation and lot of unsold inventory from the real estate companies.
    Middle class buyers are finding it very difficult to afford 2 BHK in cities.

    Even the fancied IT couple(both working) will have to think 5 times before buying a 85 lakhs 2 BHK apartment.

    The problem with unsold inventories is , the politician - builder nexus is making them survive so long.
    It is a matter of who will blink first. Right now Real estate fellas are not ready to blink, as they are sitting on black money and they are ready to wait more.

    The average Raju is waiting for the real estate prices to come crashing down, so that it becomes affordable once again.

    I think 2 scenarios
    1) real estate fellas blink first, they slash prices from 10 - 30 %, then it becomes slightly affordable.(45 lakhs home will cost 32 lakhs scenario). This will not last long, as home buyers would rush to buy and will be back to square one very soon.
    2) real estate fellas keep playing the waiting game, their stressed assets are so stressed, that it cant go on any longer. They get bankrupt, the banks who lended starting to crash and will lead to to a big local recession. Blood will be on the streets.

    Real estate sector cannot be organized and become reasonable until, the builder politician nexus eco system is crashed and burnt. Some one has to bell the cat.
     
  5. Fun_Da_Mentalist

    Fun_Da_Mentalist Active Member

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    Real estate business in India, for the most part, is shady. The smart way to play it, and also the safe way, I think, is thru housing finance companies. If people buy houses they will borrow. The mortgages to GDP ratio in India is really low.
     
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  6. Carl Icahn

    Carl Icahn Active Member

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    Another way is to buy the ancillary companies like the paint companies (Berger Paints), tile (Kajaria), Sanitary ware (Cera), plywood (Century/ Greenply), air conditioners (Voltas, Symphony) etc.
     
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  7. Long Term

    Long Term New Member

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    It might have bottomed out from the CMP of their scripts' wise, but business wise no way, if not anything at least 22% of inventory of 5 top builders (by land bank) is idol. Do not recall the report I read but it was from CREDAI.
     
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  8. Srouta Mukherjee

    Srouta Mukherjee Well-Known Member

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    If all bad news is in open such as unsold inventory, no cash on hand etc then it is bottoming out. Bottoming out is when all bad news is in open and no bad surprise is there.
     
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  9. Fun_Da_Mentalist

    Fun_Da_Mentalist Active Member

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    Based on what people tell me, in Gurgaon, inventory is around four years; excluding WIP and fresh stock. Situation is not dramatically different in other metros as well. We in India have not seen a real estate bubble collapse, so we think there is a God given bottom which is purchase cost. Japan and Spain thought so too, till realty ( pun intended) crushed them.
     
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  10. Fun_Da_Mentalist

    Fun_Da_Mentalist Active Member

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    The sector will bottom out when pricing power of builders collapses. At least in my city I don't see significant drops. Builders are holding on and maintaining pricing, maybe dropping 10 12 %. There is a mess coz people who bought land at crazy prices can't go below a certain point in pricing. Until, that is, when capitulation happens. Ashiana housing is an interesting model precisely for this reason. They are not asset heavy. Land banking is not their game.
     
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  11. Sachin pathak

    Sachin pathak Active Member

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    Then why not look at Godrej Properties...they are also have an asset light property.

    Debt levels are high but should come down with the recent Abbott deal
     
  12. Fun_Da_Mentalist

    Fun_Da_Mentalist Active Member

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    If I bought in that sector Godrej and Ashiana will be my picks. But I have a deep distrust of this business in India. Prices are kept artificially high thru a distasteful collusion between politicians, black money and election funding.
     
  13. Fun_Da_Mentalist

    Fun_Da_Mentalist Active Member

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    As you would have worked out by now, my investing style is solid companies that will first and foremost give me around 20 percent yoy. From this universe I pick ones which could potentially give me much more than that.
     
  14. kharb

    kharb Well-Known Member

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    People are talking about bottoming out.It is actually at artificial peak ,real state prices have gone out of reach of common people. Bottom will be formed only when real estate prices comes under reach of common public .For that real estate prices have to go down by more than 50%/.But real estate players will not allow to happen with support of black money.But they can not prevent time correction,which may take more than 5 years with constant prices.We need to take stock of not only unsold inventry but excessive investment in gold and real estate by average Indian is going to take a heavy toll in terms of time correction in Gold and Real estate.
     
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  15. Long Term

    Long Term New Member

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    Godrej I doubt will flunk as the guy who looks heads procurement for G&B is very hard to crack in terms of financials, one of the wizards. There is sincere and very deep value in the group.
     
  16. Fun_Da_Mentalist

    Fun_Da_Mentalist Active Member

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    That is good to know. Thank you.
     
  17. Long Term

    Long Term New Member

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    Gold yes, real estate no, as I mentioned real estate companies are overvalued as of now just because of over production of units. But there is a basic fundamental fact, our country has never done anything to tackle population. You live on rent or own a house someone has to build it, that's why this sector can never go out of picture, I have not seen anyone selling his property cheap than what he bought for. Gold pricing is not driven by time they are by market. Also, people can certainly live without gold and it has found alternatives E.g. platinum. Price of Gold in 2011 was in 33K range now we know, while real estate prices did not correct, assume it corrects to huge 25-30% it will come back again, because business fundamentally is a moat. :)

    Question : Million dollar one who to invest with : Short term the guy running maximum # of projects, eventually, he will complete or his unsold inventory will get sold and it will keep his books running.
    Long term, companies which are part of a diversified group existing for more than 10 years and have their own land bank. Who gives better return ? that remains unanswered. :)
     
  18. Fun_Da_Mentalist

    Fun_Da_Mentalist Active Member

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    In the real estate business it might make sense to look at players who have an asset light model, ie, no land banks. Players like Poddar and Ashiana may be long term propositions along with Godrej Properties.

    P.s - IMF had indicated in a study that gold might hit its bottom end of next calendar year.
     
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