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?  

Indian Real Estate: Where to from Here?
Wed, 14 Sep Pre-Open

The Indian real estate sector has now been in the doldrums in recent years. Despite this, new launches continue to happen. This begs the question: Whether and when should one buy real estate in India? To answer this, let us look at some of the nitty-gritties of the real estate sector.

One of the simple reasons for real estate woes lies is the fact that most Indian real estate has been unaffordable for a while now. This, coupled with new launches, has led to a rise in the inventory of unsold homes in India.

Here's what Vivek Kaul wrote in one of the recent editions of the Vivek Kaul Letter:

  • In terms of number of homes, various news reports suggest that around 7 lakh homes are unsold across the eight biggest cities in India.

    Despite this huge inventory, new launches continue to happen. Not a day goes by without one newspaper or another having a full page advertisement from a real estate company, announcing a new project. Having said that the number of these launches has definitely come down than in comparison to the past.

    The question is, are people buying these new homes that are being built? The straightforward answer seems to be that they are not buying as much as is being produced, by the real estate companies.

    This can be concluded from the fact that the overall inventory of the real estate industry has been going up and is now at a ten-year high. If all that is being built was being bought, the total inventory would have been falling and not going up, as is the case. Nevertheless, it would be a stretch to say that homes are not being bought and sold, at all.

So there are two factors playing out at present: First- Demand for real estate has fallen. People are not buying homes as they used to do earlier. Second- Despite this fall in demand, new launches continue to happen, which in turn leads to a rise in inventory level.

Apart from this, real estate companies continue to witness financial problems. The total debt of 120 real estate firms has jumped from Rs 593 billion in 2011-12 to Rs 832 billion in 2015-16. Moreover, rising debt burden has also deteriorated the capacity of firms to service their interest obligations. As per an article in Business Standard, the interest coverage ratio for 120 firms has declined from 2.5 in 2011-12 to 1.79 in 2015-16.

After looking at the above factors, a quick recovery in the real estate sector seems to be a farfetched possibility as of today.

Some questions come to mind: Will property prices in India come down? Will the gap between rents and EMIs shrink?

To find the answers to these questions, we highly recommend you read the latest entry in Vivek Kaul's Diary: Jaitley's New Real Estate Pipe Dream: Where Rents Equal EMIs

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 "Indian Real Estate: Where to from Here?". Click here!

  

Views on News

The Best Stocks in a Volatile Market podcast (Views On News)

Mar 5, 2021

Rahul Shah on the qualities that make for a good investment in an up and down market.

A New Super Cycle in Metals? (Fast Profits Daily)

Mar 5, 2021

In this video, I'll tell you if there is huge money to be made in metals or if there is more to the super cycle story.

Mirae Asset Corporate Bond Fund: Aiming for Growth with Focus on Quality and Liquidity (Outside View)

Mar 5, 2021

PersonalFN analyses the features of Mirae Asset Corporate Bond Fund and explains the potential this fund has to offer to its investors.

Charge Your Portfolio with this Smallcap Proxy Play on India's EV Revolution (Profit Hunter)

Mar 5, 2021

This could be the biggest wealth creator of the decade.

Inflation & Your Investments (Fast Profits Daily)

Mar 4, 2021

Inflation is the buzz word in the world of finance these days. It impacts all of us. Here's how it affects your investments.

More Views on 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.

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...

Gold 65,000 and Silver 84,000 in 2022

Feb 26, 2021

In this episode of the Investor Hour, India's #1 trader, Vijay Bhambwani, talks to us about the stock market, his new targets for gold and silver, the best long-term investment opportunity, and a lot more.

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 5, 2021 (Close)

MARKET STATS