Saturday, June 7, 2008

Is the Indian Real Estate Market really on fire?

So what’s happening on the realty front in the recent days?

The local realty market is still hot. Prices aren’t really going down. The waiting for the home-buyers isn’t much working in their favour. The house property market is still buoyant and the developers are sitting tight with the prices that are set in different parts of the country. Infact property prices across the country have increased by more than 50 % and there are no signs of this slowing down. The US sub-prime issues haven’t still settled but that hasn’t deterred the demand in the local Indian market.

In the meanwhile, the same developers are having a tough time to raise capital for their upcoming projects. The developers aren’t getting steady PE funding for their projects and are seeking newer ways to raise capital.

India’s fourth largest realty developer by market value, Indiabulls Real Estate Ltd, floated its Real Estate Investment Trust (REIT) in Singapore (REIT is not yet allowed in India). Indiabulls seeks to raise S$388.3 million ($284 million) from selling 353 million units at between S$1 and S$1.10 a piece. The funds will help the company develop, acquire or invest in office space in Mumbai and around. DLF Ltd, India’s largest developer, is slated to release its REIT in the coming months. Unitech Ltd. is expected to follow soon.

On the other hand, many corporates having surplus land in India continue to hold on their assets in anticipation of appreciation of the land value. Companies like ACC, Ranbaxy, Pfizer and Rallis chose to sell off some assets and have earned extraordinary profits on their Balance Sheets. While some like Bombay Dyeing, Godrej Industries choose to create huge assets while keeping their land-banks.