Indian Stock Market News, Equity Market and Sensex Today in India | Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Can real estate see a comeback?
Thu, 31 Jan Pre-Open

The real estate bubble is finally showing signs of bursting. But can home buyers finally celebrate? Home sales have been slowing despite a number of new launches and a correction in prices. The Reserve Bank of India (RBI) may have recently cut the repo rate and the cash reserve ratio by 0.25%, however interest rates for real estate firms continue to be high. With cash flows deteriorating, many are finding it increasingly difficult to pay interest rates on loans and are defaulting.

While this may be bad news for banks which are already facing asset quality issues, buyers may get a chance to get a great deal. The more the sector is under pressure, these firms will be forced to sell their inventory at throwaway prices in order to build up cash-flows. Plus, they are facing a liquidity crunch, as the RBI has refused to allow banks to restructure loans to real estate firms without providing for potential defaults.

Most real estate firms have high leverage, which they tanked up on when the economy was in an upswing. Their balance sheets are now goaded up with expensive bank loans, and when the going gets tough it gets more and more difficult to pay back. This is similar to what happened to Dubai. With the onset of the global financial crisis of 2008, Dubai's real estate market declined after a six-year boom. Real estate value tanked and expensive plots remained vacant.

Now for Indian firms, even raising equity capital in this environment is difficult. Earlier these firms would pledge shares with banks. But with these stocks severely underperforming the market, even this funding route is capped. Shares in Housing Development & Infrastructure (HDIL) in the last week tanked over 30%. The company's consolidated net debt was at around Rs 38 bn as of September 2012. The reduction of debt hinges on cash flows from two Mumbai-based projects. Other real estate firms are also in a similar soup.

Buyers can however cheer. According to Pankaj Kapoor, Managing Director of Liases Foras, a property consulting firm, the Mumbai real estate market is ripe for a correction. The city has seen the highest number of new launches since the recession of 2008-09. But the good part is that the prices of the new launches were 24% lower than those of the existing supply. Plus, now with the RBI cutting rates, while banks may be cautious to lending to real estate players, they will be more than willing to pass on the benefits to retail home buyers. This could lead to a comeback from the real estate sector which has been lagging behind for the past few years.

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

Read the latest Market Commentary


What else is happening in the markets today? Dig in...

Equitymaster requests your view! Post a comment on "Can real estate see a comeback?". Click here!

  

Stock Market Updates

IFCI Share Price Up by 13%; BSE 500 Index Up 0.6% (Today's Market)

Mar 2, 2021 01:06 PM

IFCI share price is trading up by 13% and its current market price is Rs 11. The BSE 500 is up by 0.6%. The top gainers in the BSE 500 Index are IFCI (up 12.6%) and SYMPHONY (up 17.1%). The top losers are PRESTIGE ESTATES and TV TODAY NETWORK .

IRB INFRA Share Price Up by 5%; BSE REALTY Index Up 0.1% (Today's Market)

Mar 2, 2021 12:53 PM

IRB INFRA share price is trading up by 5% and its current market price is Rs 113. The BSE REALTY is up by 0.1%. The top gainers in the BSE REALTY Index are IRB INFRA (up 5.1%) and INDIABULLS REAL EST (up 5.5%). The top losers are PRESTIGE ESTATES (down 0.2%) and OMAXE (down 0.5%).

TATA MOTORS DVR Share Price Up by 5%; BSE AUTO Index Up 2.3% (Today's Market)

Mar 2, 2021 12:49 PM

TATA MOTORS DVR share price is trading up by 5% and its current market price is Rs 139. The BSE AUTO is up by 2.3%. The top gainers in the BSE AUTO Index is TATA MOTORS DVR (up 5.3%). The top losers is MOTHERSON SUMI (down 0.2%).

BASF INDIA Share Price Up by 11%; BSE 500 Index Up 0.6% (Today's Market)

Mar 2, 2021 12:35 PM

BASF INDIA share price is trading up by 11% and its current market price is Rs 2,120. The BSE 500 is up by 0.6%. The top gainers in the BSE 500 Index are BASF INDIA (up 11.5%) and SYMPHONY (up 11.7%). The top losers are THE RAMCO CEMENTS and ESCORTS LIMITED (down 0.1%).

MINDTREE Share Price Up by 5%; BSE IT Index Up 1.9% (Today's Market)

Mar 2, 2021 12:22 PM

MINDTREE share price is trading up by 5% and its current market price is Rs 1,715. The BSE IT is up by 1.9%. The top gainers in the BSE IT Index is MINDTREE (up 5.0%). The top losers are PERSISTENT SYSTEMS (down 0.8%) and TATA ELXSI (down 1.4%).

Sensex Opens 450 Points Higher; BPCL Jumps 4% (Today's Market)

Mar 2, 2021 09:30 am

Indian share markets open higher. The BSE Sensex opened up by 481 points, while the Nifty is trading higher by 137 points.

View More Indian Share Market News

Most Popular

It's the Beginning of a New Bull Phase in Smallcaps(Profit Hunter)

Feb 24, 2021

Last time the smallcap index crossed 19k a big correction followed. Here's what makes it different this time.

Make Rs 5,000 Per Day Trading the Market(Fast Profits Daily)

Feb 25, 2021

In this video, I'll show you how to get started on the path to daily trading profits.

I Believe the Investment of the Year Will Be...

Feb 19, 2021

In this episode, ace trader Brijesh Bhatia talks to us about the best investments of 2021, his profitable trading system, and much more.

The Hidden Tesla in My Great Indian Wealth Project(Profit Hunter)

Feb 23, 2021

An Indian company founded three decades ago in a garage caught my attention...

More

India's #1 Trader
Reveals His Secrets

Secret To Increasing Your Trading Profits Today
Get this Special Report,
The Secret to Increasing Your Trading Profits Today, Now!
We will never sell or rent your email id.
Please read our Terms

S&P BSE SENSEX


Mar 2, 2021 02:04 PM

MARKET STATS