1st of the series
Track2Realty Exclusive
It is not just strange, it is ironic. When the facts and indications are all misleading, investor in the Indian market have no choice but to keep the fingers crossed and it is precisely the reason what is hurting the realty stocks, finds Track2Realty.
Fact # 1—While the house you bought last year has risen in value; the shares of your once-favourite real estate company are bleeding. Fact # 2—Respondents of Track2Realty Home Buying Satisfactory Survey say they are unhappy with the overall quality of the house, but would like to invest in the stocks of the same realty companies as they find it to be the best investment instrument.
Well, before a conclusion is drawn that the two facts above stated are contradictory and hence misleading, it is important to understand the dichotomy of the realty stocks. The intent of investors is definitely there added with the growth prospect; something that can bring smile on the faces of the developers, but the sector’s short to medium term outlook appears bleak at this moment.
Facts speak for themselves. The Bombay Stock Exchange (BSE) Realty index has fallen 37 per cent between March 2, 2010, and July 29, 2011. The BSE Sensex, in contrast, has risen 8.49 per cent during the period.
So, as you wonder whether to buy, hold or sell real estate stocks, market experts advise caution. After all, it is not just a demand-supply dynamics that will take realty stocks to bull or bear market. The debt of most realty companies has risen sharply during 2010-11 compared to the previous financial year.
There has been an 18 per cent increase in construction cost over the last two years due to higher prices of steel, cement and bricks, along with rising labour costs. This, along with tight liquidity and rising interest rates, led to a surge in debt of real estate companies.
…to be continued
