If you are an investor in realty stocks, you have good reason to be aggrieved because the entire realty sector has grossly under-performed. On a YoY basis, the BSE Realty Index has lost 21%. The YTD loss is 14%. Even over three years, the Index has lost 35%.
Samir Arora, the whiz-kid fund manager of Helios Capital, was the first to sound that warning that the realty sector would see heavy turbulence. “Real Estate Sector Will Be Killed In NAMO’s Black Money Crusade” he announced in his typical dramatic fashion.
However, other leading stock wizards took a different view.
Ramesh Damani, the Nawab of Dalal Street, advised that if we want mega bucks, we must forget Pharma and IT stocks and load up on realty stocks. He opined that the realty stocks are close to bottoming out.
Ramesh Damani’s theory was endorsed by other gurus like Rakesh Jhunjhunwala, Radhakishan Damani, Ajay Piramal, Prof Sanjay Bakshi, Porinju Veliyath and Nilesh Shah, by each of them loading on to their own favourite realty stocks.
Dr Sanjay Chaturvedi, the editor of Accommodation Times, is regarded as an expert on the realty sector owing to the fact that his publication is devoted exclusively to the happenings in the sector.
In a series of tweets, Dr Sanjay Chaturvedi has projected an extremely pessimistic scenario for the realty sector and advised investors to dump realty stocks:
With Govt's vision of "Housing for All", affordable home market will collapse soon. There will be ghost town just like Boisar Tata Project.
— Dr Sanjay Chaturvedi (@sanjachat) December 6, 2015
It's time to come out of your investments from affordable housing and budget homes, govt will flood housing in this segments soon.
— Dr Sanjay Chaturvedi (@sanjachat) December 6, 2015
Housing investment will see negative growth in next ten years, till 2025. Commercial space all set to zoom up.
— Dr Sanjay Chaturvedi (@sanjachat) December 6, 2015
Property portals will face closure for lack of content. Brokers all India are against them, project details will be on official HRA site.
— Dr Sanjay Chaturvedi (@sanjachat) December 6, 2015
Since Mumbai having 9000 acres slum, there will be 36000 acres more stock coming under 4 FSI rules. Total 45 k acres coming as new stock.
— Dr Sanjay Chaturvedi (@sanjachat) December 6, 2015
The implications of a prolonged slow-down in the realty sector will also be experienced by other stocks such as Cera Sanitaryware, Kajaria Ceramics, Century Plyboards, HSIL etc. Even housing finance companies like Repco Home Finance, etc are also in the line of fire.
In the circumstances, it is advisable for us to be cautious. While selling realty and allied stocks at this stage is not prudent as they are already at beaten down valuations, fresh allocations to the sector ought to be avoided till there is clarity about recovery in the sector.
I am trying to understand why this development will be negative for Repco? Th company primarily funds low income groups by providing unsecured or small loans to the largely unbanked demographic. With budget housing becoming predominant, their customer base should increase resulting in better numbers. Is this logic incorrect?
Same argument for Gruh Finance and Canfin Homes aa well.
Those whose memory is long must be remembering my earlier comment,when all experts were advising for realty stocks,I had maintained that worst is yet to come.Modern IT systems of tracking various financial transactions,Public backlash to scams of UPA times in Loksabha polls,masrooming of various political outfits like AAP under name of black money,comparatively strong BJP govt at centre headed by Modi which does not require help of crooks for its survival are working against Reality Sector.Biggest of these factors ,Corruption ,Mother of Reality Sector is under Recession.Reality sector was Thriving more on investment of black money,which has already killed the real demand due to unafforadbilty.People are now over invested in reality sector and it is no more giving any return like its under performing younger brother Gold.More over people having black money now become static and motionless for the fear of detection by IT deptt..As like my earlier comments,this sector is for a Long Term Stagnation.There will be less of price correction,but long time correction is realy the realty of Reality Sector.Many of small invester like me have also small investments in this sector and knowing this first hand.But as far as housing finance sector is concerned,I am bullish because housing loan will continue to be taken by end consumers. Any short fall due to shortage of investers will be compensated by increasing affordability due to continuous ongoing time correction.Similarly tiles , Toilets and other housing feeding sector like paints etc will continue to have satisfactory growth due to contnious replacement and renovation market in a country of 1.3 billion.More over these feeder sectors will survive on ever increasing middle class and rural economy due to increasing aspirations of this class. So housing finance compnies, tiles, toilites related,paints etc would continue to give market returns inspite of long spell of stagnation of Reality Sector. So these related stocks are good long term hold without worrying for a second but reality sector is perfect avoid.
good comment.
All apprehensions are more or less factored in. I dont see much downside, henceforth.Not hopeful of positive delopments either in near future.
Stupid analysis. The bubble is in land prices. As more and more houses are built, price of finished homes will go down because of excess supply but all these new houses will need tiles, sanitary, ply board and even housing finance which will continue to do well.
Agree with boarders on the fact this will be a positive for
– Low ticket size home finance companies
– Ancillary industries – such as tiles/ceramics/plumbing/plywood/cement etc
It could have an impact on pricing of the budget housing segment – however where will the builders come from. I believe there will be some sort of a tendering process and it is the same lot of developers who will get some of these projects.
Overall – you may need to be cautious and choose your picks wisely amongst the realty companies
hahahah
I remember
Porinju said realty at best price, now this happen ….
Porinju on globus went burst …
he said he bought sugar … tanked
still his twitter followers kept rising …
Realty price is going up slowly but steadily. Globus is currently trading at Rs. 83-84 range, while Porinju bought it at 66.30 on Nov 24th (25% up in less than 2 weeks), yet you call it a price burst. Please share why you hate him on a personal level.