Helping You Build Wealth With Honest Research
Since 1996. Read On...

MEMBER'S LOGIN

MEMBER'S LOGINX

     
Invalid Username / Password
   
     
   
     
 
Invalid Captcha
   
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Revealed
India's Third Giant Leap

This Could be One of the Biggest Opportunities for Investors




Important: We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
By submitting your email address, you also sign up for Profit Hunter, a daily newsletter from Equitymaster
covering exciting investing ideas and opportunities in India.

AD

Why realty prices may crash sooner...
Wed, 16 Feb Pre-Open

442 m square feet of real estate. That is the kind of inventory that 6 Indian metros were together holding at the end of December 2010. The interest costs on housing loans are already hovering in double digits. Hence chances are that the inventory could only pile up in the months ahead. In terms of number of months of inventory, the data is even more shocking! Based on average monthly sales, a healthy real estate market usually has 8 months of saleable inventory. As per a business daily, the same was nearly thrice the figure (23 months) in December 2010. And we will not be surprised if most of the unsold inventory is in the premium housing segment.

Being its conservative self, the RBI has significantly tightened lending norms for the purchase of high value properties. The high rate of slippages in the quality of commercial real estate loans is also a worry to the central bank. Even as the supply of residences outstrips demand, property developers will have an estimated Rs 140 bn to be repaid to banks by the end of the fiscal. The instances of loan defaults is therefore expected to increase in this segment as the prospects of accessing equity markets for funds has also dried up for the sector.

Data source: Mint

The woes for India's realty sector does not end there. Besides commercial, the outlook for residential projects is also not very rosy. The drop in residential property sales has led to a spike in inventory levels in several cities. As per a Credit Suisse report, amongst the metros, Mumbai has been the worst hit in terms of residential projects. The city had nearly 88,000 unsold flats at the end of 2010. About 25,000 of them are within the city limits of India's commercial capital. Given that most of them belong to the premium segment, the sale for them is unlikely to move faster in the coming months.

Thus while China worries about the excessive bank lending to its real estate sector, we may have a real estate bubble bursting nearer to home. What is a matter of relief is that our central bank is on top of the matter. The RBI has done a good job of restraining unviable lending to real estate in the past as well. And it is unlikely that there will be any 'Too Big To Fail' players here.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

View all commentaries | Archives

Read the latest Market Commentary


Equitymaster requests your view! Post a comment on "Why realty prices may crash sooner...". Click here!

  
ABOUT EQUITYMASTER

Since 1996, Equitymaster has been the source for honest and credible opinions on investing in India. With solid research and in-depth analysis Equitymaster is dedicated towards making its readers- smarter, more confident and richer every day. Here's why hundreds of thousands of readers spread across more than 70 countries Trust Equitymaster.

PREMIUM PRODUCTS
QUICK LINKS
POPULAR TOPICS
TRENDING TOPICS
FREE NEWSLETTERS
EQUITYMASTER SUPPORTS
  • HelpYourNGO
  • You Tube
  • Linkedin
  • Twitter
  • Telegram
  • Google Play

Copyright © Equitymaster Research Private Limited (formerly Equitymaster Agora Research Private Limited).

Whitelist | Refer | Terms | Privacy | Contact | About | Sitemap

Phone +91-9136015013

Equitymaster Research Private Limited (formerly Equitymaster Agora Research Private Limited) (Research Analyst)
SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Email: info@equitymaster.com. Website: www.equitymaster.com.
CIN:U74999MH2007PTC175407

Name of the Compliance & Grievance Officer: Ms Sonal Ramachandran
Telephone: +91-22-61434003 | Email: compliance@equitymaster.com

LEGAL DISCLAIMER:
Investment in securities market are subject to market risks. Read all the related documents carefully before investing.
Registration granted by SEBI and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.

All rights reserved. Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

Equitymaster Research Private Limited (formerly Equitymaster Agora Research Private Limited) (Research Analyst) bearing Registration No. INH000000537 (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA, Canada or the European Union countries, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.