Real Estate Update

Several of my friends were in town this week for a real estate conference and I got a chance to catch-up with them and get the real deal on the Indian real estate market. They said most of the conversations at the conference went like this:

Developer A – We are okay, we didn’t grow too fast but Developer B is screwed
Developer B – We are okay, we started early but Developer A is screwed

The build out for the retail segment is a complete disaster, malls are empty and the ones operating have occupancy rates from 25% to 80%. In many instances the malls cannot be reconfigured, case in point the Crossroads Mall in South Bombay was converted to an office building after an extended and expensive renovation.

Residential is set for a large fall since many of the new projects were bought by investors looking for a quick flip. With rates going up, people will end up bailing on these units and add to the overall supply.

This past week the equity markets were not kind to the Indian real estate sector including some of the companies I track. HDIL (down 87% from peak, click the above image for a chart), Orbit (-83%), Parsvnath (-84%) and Sobha (-82%) are all near their all-time lows, of course most have only recently listed on the exchanges. HDIL is the Bombay based property kingpins run by the Wadhwan family. This research report from ENAM covers HDIL, the report is good if you want a macro view on the Bombay real estate market.  ENAM had a price target of Rs. 712 when it published the report on Aug 18, 2008, on Sept 26, HDIL closed at Rs 190.35. I might be a bit jealous of HDIL as they have one of the largest collection of sweet rides in Bombay, most notably the Rolls Royce Drop Head Coupe.

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