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Property Price Trends in Chennai

Last updated: May 20 2021
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  • Re : Property Price Trends in Chennai

    Originally posted by BigBear View Post
    Indian Builders are very shrewd and with ample support from politicians common man dont know the dirty games they play with their money.Take an example of a south based listed company who have a debt of 1900 crore and they are paying interest of 300 crore for this.But if you take their earnings it is close to 300 crore only.So whatever they are earning(read from new projects) are going into paying interest.Do you think the builder will finish according to schedule.This is nothing but a giant ponzi scheme going on.
    All the listed companies have heavy debt in their balance sheets and noone knows what is hidden in unlisted space as their finanicials are not in public domain and most of the Chennai builders are unlisted.So better know the financial condition of the builder before putting your money.
    Any one can come up with baseless allegations,Conspiracy theory and scare mongering. Where is the proof.

    how could anyone continue to operate a business for more than 12 months with such a situation. They could have gone broke a long time ago.
    They wouldn't have survived the testing time we had over the past 18 months.

    Comment


    • Re : Property Price Trends in Chennai

      Originally posted by BigBear View Post
      Indian Builders are very shrewd and with ample support from politicians common man dont know the dirty games they play with their money.Take an example of a south based listed company who have a debt of 1900 crore and they are paying interest of 300 crore for this.But if you take their earnings it is close to 300 crore only.So whatever they are earning(read from new projects) are going into paying interest.Do you think the builder will finish according to schedule.This is nothing but a giant ponzi scheme going on.
      All the listed companies have heavy debt in their balance sheets and noone knows what is hidden in unlisted space as their finanicials are not in public domain and most of the Chennai builders are unlisted.So better know the financial condition of the builder before putting your money.
      it is always better to buy in small projects 4-24 flats and not huge township MSBs,the smaller builders do not get loans from banks(project loans) and do not overleverage their finances they generally stick to 1-4 projects at a time and deliver on time.

      Comment


      • Re : Property Price Trends in Chennai

        This is not baseless ...

        Originally posted by Economist View Post
        Any one can come up with baseless allegations,Conspiracy theory and scare mongering. Where is the proof.

        how could anyone continue to operate a business for more than 12 months with such a situation. They could have gone broke a long time ago.
        They wouldn't have survived the testing time we had over the past 18 months.
        Economist,

        This is based on the report in DNA also quoted elsewhere. So, its based on some kind of research done by a newspaper-wala. Not exactly scientific evidence, but research of some sort, nevertheless.

        As soon as I read it, first thought coming to my mind was Sobha since I could recollect that their debt was around that level and they had successfully done a QIP round after failing once!

        Maybe it is, maybe it isn't. But simply because builders are raising prices, it does not mean they are in the pink of health. Please note that most times, when companies (or people) are in their most desperate state, they will bring out their biggest bluff - recall Lehman Brothers which only 3 days before folding up gave an "All ok" press release!

        cheers

        Comment


        • Re : Property Price Trends in Chennai

          Originally posted by Economist View Post
          Any one can come up with baseless allegations,Conspiracy theory and scare mongering. Where is the proof.

          how could anyone continue to operate a business for more than 12 months with such a situation. They could have gone broke a long time ago.
          They wouldn't have survived the testing time we had over the past 18 months.
          See the proof below

          ]http://www.livemint.com/2009/02/20002520/Sobha-Developers-still-in-talk.html[/url]

          You told chennai RE gave CAGR of 139% between 1986-89.Can you show me the proof for that.That will show who is spreading false information in this forum.

          Comment


          • Re : Property Price Trends in Chennai

            Originally posted by BigBear View Post
            See the proof below

            ]http://www.livemint.com/2009/02/20002520/Sobha-Developers-still-in-talk.html[/url]

            You told chennai RE gave CAGR of 139% between 1986-89.Can you show me the proof for that.That will show who is spreading false information in this forum.

            Your Feb 2009 article is old and out of date and everyone and most organisations around the world was is crisis at that time, Typical to all REITs and real-estate related business all over the world at that time (Typical examples are Mirvac,Centro,Emmar,Westfeild,Stockland)

            Sobha developer had a land bank of 3,000 acres in Feb 2009, primarily in South India and Pune.
            The value of Sobha’s land holding in Feb 2009 was Rs 4,380 C and the debt was Rs 1,300C
            Sobha Developers was leveraged a little over 1.6 per cent on its equity in Jan 2009..

            Your article says the companies net profit fell to 7.5 C (Net profit is after EBIT) that tells they are servicing the interest obligation and managed some profit albeit smaller than previous years.

            Sobha Developers targeted to raise about Rs 1,200-1,400 crore by selling part of its land parcels.The cost of acquisition of the land that the company plans sell was around Rs 600-800 crore. The plots identified are 100 acres in Pune, 38 acres in Bangalore and around 300 acres in Kochi.

            The developer has been successful in reducing its debt equity ratio from 1.7 to a manageable 0.85 by June 2009. It is looking to offer more than 2 million square feet of new projects this fiscal.

            The developer has also raised $110 million by diluting 22.5% stake in the company through qualified institutional placement of shares to investors. It has already paid about Rs 370 crore from the funds raised to its debtors.

            Other majors were successful in reducing debts as well.


            A clean up act has helped the real estate sector to strengthen its balance sheets. Leading players like DLF,UNITEC,HDIL & Sobha, together have erased a total debt of almost one billion dollar June quarter.

            ]http://myiris.com/shares/research/ESL/SOBDEVEL_20090729.pdf[/URL]

            The share price of Sobha was Rs 80 on the day of your article and today’s close it was Rs 264 (That is a 230% gain in share price since Feb 2009)

            This is a good example of the strength of Indian realty firms who has successfully managed its high debt obligations.

            The bottom line is the debts are backed by solid securities (land bank) The LVR (loan to value ratio) in Feb 2009 was only about 33%.

            You should read this: Debt Refinancing Concerns Eased
            Asian REITs revived
            http://www.capitalandinside.com/inde...-reits-revived


            WITH THAT MUCH OF ASSETS THEY ARE NOT GOING BROKE.

            Comment


            • Re : Property Price Trends in Chennai

              Sure, but they are in for a lot of pain nevertheless ...

              Originally posted by Economist View Post
              Your Feb 2009 article is old and out of date and everyone and most organisations around the world was is crisis at that time, Typical to all REITs and real-estate related business all over the world at that time (Typical examples are Mirvac,Centro,Emmar,Westfeild,Stockland)


              You should read this: Debt Refinancing Concerns Eased
              Asian REITs revived
              ]http://www.capitalandinside.com/index.php?option=com_content&view=article&id=239:a sian-reits-revived[/url]


              WITH THAT MUCH OF ASSETS THEY ARE NOT GOING BROKE.

              Economist,

              You are correct. As I had already stated in an post around end of last year while doing a similar analysis, I had stated the same about Sobha that they were reasonably comfortable wrt debt. The rreal killer at that time was Unitech (10,400 crore debt) and DLF (14000 crores).

              So, yes, they would not collapse. But things are NOT so hunky dory for them all the same.

              Their principal problem is liquidating inventory built using debt! A lot of Unitech's inventory (please remember that over 7000 crores was in inventory) was built at the highest costs possible as land was acquired in the latter part of the bull run and raw material was also bought during boom times. Now you add the interest burden on the WIP and FG and you see that margins are starting to get rather thin. Then add this drop in prices and you might even see margins disappearing. The importan point to note is that this debt rollover was done at unusually high rates during the crisis and that is adding to the pressure. This point is what is coming out when the newspapers report that RE companies are using down payment for one project to square out painful debt already raised for older projects - a sure sign of distress which could lead to bankruptcy if volumes do not pick up for some more time. Incidentally the so-called land-bank is overhyped since much of these land parcels are fairly illiquid under normal circumstances and are much more illiquid at the prices these RE companies are quoting. Example, that Sobha property opposite Koshy's (photo in the article linked by you) that was taken up over 2 years ago is languishing for a long time without buyers though I believe Sobha is trying its best to sell the project away.

              So, the contention is that, the high debt built up by these companies were for a sales volume level much higher than these levels.

              And exchanging one form of debt for another is not a solution in the right direction. Nor is diluting stake of promoters in raising equity at high premiums.

              As you know, when the ratio of Sales to the (combination of Equity, Reserves and Debt) Total Capital Employed is very low, then earnings generally declines to uncomfortable levels (as Net Margins in RE is around 10% - see Sobha's Net Margin in the boom years 2006-07). Stock Prices eventually follow downwards and remain depressed for long periods of time.

              In fact I used to be shocked at how high the P/Es for RE companies were back in those days since NPM was so mediocre. But then I realised that, like Retail companies (Pantaloon) and Suzlon these guys were taking the public for a ride by ramping up sales volumes at a very high rate and making it look like these were very profitable sectors!!! As per my analysis of Retail, margins are generally in the 6-8% range while P/E was riding well over 50 times!

              My own take is that our RE sector is overdoing this global bear market rally and its become time for a correction. Since markets are continuing to show superheated behavior, the corection will be equally severe. You might expect the next correction to decline to around 10000 levels on the Sensx. And the high-beta sector like RE will take the lead in declining the most and giving a golden opportunity to pick some good growth stocks at very attractive levels.

              I still think that the bottom for the RE sector is yet to come and that will only be when this speculative overpricing is complete ironed out from the economy and the next bull wave is built on more solid fundamentals - volumes at reasonable prices and margins.

              cheers
              Last edited October 15 2009, 01:36 AM.

              Comment


              • Re : Property Price Trends in Chennai

                Unitech sales at Rs 4000 crore in 6 months

                ]http://economictimes.indiatimes.com/markets/real-estate/news-/Unitech-sales-at-Rs-4000-crore-in-6-months/articleshow/5121566.cms[/URL]



                Is it true?

                Comment


                • Re : Property Price Trends in Chennai

                  Originally posted by Economist View Post
                  Your Feb 2009 article is old and out of date and everyone and most organisations around the world was is crisis at that time, Typical to all REITs and real-estate related business all over the world at that time (Typical examples are Mirvac,Centro,Emmar,Westfeild,Stockland)

                  Sobha developer had a land bank of 3,000 acres in Feb 2009, primarily in South India and Pune.
                  The value of Sobha’s land holding in Feb 2009 was Rs 4,380 C and the debt was Rs 1,300C
                  Sobha Developers was leveraged a little over 1.6 per cent on its equity in Jan 2009..

                  Your article says the companies net profit fell to 7.5 C (Net profit is after EBIT) that tells they are servicing the interest obligation and managed some profit albeit smaller than previous years.

                  Sobha Developers targeted to raise about Rs 1,200-1,400 crore by selling part of its land parcels.The cost of acquisition of the land that the company plans sell was around Rs 600-800 crore. The plots identified are 100 acres in Pune, 38 acres in Bangalore and around 300 acres in Kochi.

                  The developer has been successful in reducing its debt equity ratio from 1.7 to a manageable 0.85 by June 2009. It is looking to offer more than 2 million square feet of new projects this fiscal.

                  The developer has also raised $110 million by diluting 22.5% stake in the company through qualified institutional placement of shares to investors. It has already paid about Rs 370 crore from the funds raised to its debtors.

                  Other majors were successful in reducing debts as well.


                  A clean up act has helped the real estate sector to strengthen its balance sheets. Leading players like DLF,UNITEC,HDIL & Sobha, together have erased a total debt of almost one billion dollar June quarter.

                  ]http://myiris.com/shares/research/ESL/SOBDEVEL_20090729.pdf[/url]

                  The share price of Sobha was Rs 80 on the day of your article and today’s close it was Rs 264 (That is a 230% gain in share price since Feb 2009)

                  This is a good example of the strength of Indian realty firms who has successfully managed its high debt obligations.

                  The bottom line is the debts are backed by solid securities (land bank) The LVR (loan to value ratio) in Feb 2009 was only about 33%.

                  You should read this: Debt Refinancing Concerns Eased
                  Asian REITs revived
                  ]http://www.capitalandinside.com/index.php?option=com_content&view=article&id=239:a sian-reits-revived[/url]


                  WITH THAT MUCH OF ASSETS THEY ARE NOT GOING BROKE.
                  Your Feb 2009 article is old and out of date and everyone and most organisations around the world was is crisis at that time, Typical to all REITs and real-estate related business all over the world at that time (Typical examples are Mirvac,Centro,Emmar,Westfeild,Stockland)
                  >You meant to say if another crisis happens(most probably will happen due to excessive money printing across the world) all the RE companies will again fall into crisis?So whats the point in putting money in companies which repeatedly falls intocrisis.

                  Sobha Developers targeted to raise about Rs 1,200-1,400 crore by selling part of its land parcels.The cost of acquisition of the land that the company plans sell was around Rs 600-800 crore. The plots identified are 100 acres in Pune, 38 acres in Bangalore and around 300 acres in Kochi.
                  >But where are the buyers when all the major builders are trying to deleverage by selling their landbanks and projects.Builders selling their landbanks is itself a clear sign of distress as that is their main resource.


                  The share price of Sobha was Rs 80 on the day of your article and today’s close it was Rs 264 (That is a 230% gain in share price since Feb 2009)
                  >
                  It was Rs 1100 during early 2007 and that was a whoping 76% down.So can we assume the land and project value thay hold had decreased 76% from 2007.

                  My bottomline is whether they will go bankrupt or not but investing in new project is very risky as there is no guarantee these guys will even start work considering the financial conditions they are in.
                  Last edited October 15 2009, 09:52 AM.

                  Comment


                  • Re : Property Price Trends in Chennai

                    Absolutely right!

                    Originally posted by BigBear View Post
                    Your Feb 2009 article is old and out of date and everyone and most organisations around the world was is crisis at that time, Typical to all REITs and real-estate related business all over the world at that time (Typical examples are Mirvac,Centro,Emmar,Westfeild,Stockland)
                    >You meant to say if another crisis happens(most probably will happen due to excessive money printing across the world) all the RE companies will again fall into crisis?So whats the point in putting money in companies which repeatedly falls intocrisis.

                    The share price of Sobha was Rs 80 on the day of your article and today’s close it was Rs 264 (That is a 230% gain in share price since Feb 2009)
                    >
                    It was Rs 1100 during early 2007 and that was a whoping 76% down.So can we assume the land and project value thay hold had decreased 76% from 2007.

                    My bottomline is whether they will go bankrupt or not but investing in new project is very risky as there is no guarantee these guys will even start work considering the financial conditions they are in.

                    BigBear,

                    In fact back in early 2008 I had predicted that HCL Tech would go from 300+ to double digits. Everyone laughed (I mean the investors I advice). When I recommended at 85 (most people I adviced asked me at 85 why did I not force them to sell at 300+) that people buy HCL tech again they told me that I was mad and that the world was going to end! Today, the same people are telling me, "why didn't you force us to buy at 85!!!"

                    Like it or not, people behave like that when in a mob. This mob behavior is what leads to cycles of extreme positive and negative mental outlook. A person who recognises this can track it and use it to very great advantage - which is what I propose to do ...

                    As you can see, back in March there was extreme pessimism (actually in Oct 2008 it was worse). Today, there is extreme optimism without much change in reality on the ground. What has changed is the mood in society. It is this mood that drives prices and since they happen in cycles, you see cyclicity in price movement.

                    What people do not seem to realise is that there are short, medium and long term cycles. Then there are very long term and super long term cycles spanning 100s of years. Most people are looking at the short term cycle (Mar-Oct) and are thinking this bear market is over (maybe in India it is a consolidating bear market where prices may not completely crash, but in the US it is in a crash-type bear market due to fundamentals being extremely bad). And the US does have significant impact on other economies of the world when it crashes!

                    If you notice, this recent "growth" is happening on the basis of a low base effect (as 2008 saw significant lows in production and consumption, dividing by a low number gives a high result) and a rebuilding of inventory in the hope of continuing growth and an end to recession.

                    But this is not what the RBI and the FED are stating. They are saying that real demand numbers continue to be towards the lower side and there is not great strength in them so far! And that the Stimulus should in no way be removed. This stimulus is what is propping up the world's economy and the damaging part (the high-risk derivatives business) is being merrily continued by the global thieves - watch JPM show imprived performance mainly due to this trade). So, in fact, the world is in a more precarious state today than it was in 2008. And when this bullish rally ends (as I expect it to pretty soon), pessimism will come riding back again as reality of the huge risks we carry return).

                    If you take the view to the 20000 ft level we see that we are in a longer term bear and will see a correction of large proportions soon. At the bottom of that correction I expect to see RE company share lower (or at least near their original lows, Unitech near 20, Sobha near 80, etc). This will happen when this short-term buying will end and the next wave down will see these companies going into another business-winter with an even weaker cash position and continued disinterest from buyers.

                    If you are willing to be dispassionate about it and track the decline, you will be one of the very few to have cash to buy both peoperty as well as stock (in fact even Gold and Silver) at super bargain prices again. My hope is that Unitech will one day come to single-digit prices and then it is a great buy!

                    Till then, its okay for the mob to think we are crack. Ultimately, its the cash in bank which matters!!! And holding property and other assets bought at historically low prices!!!

                    cheers
                    Last edited October 15 2009, 01:28 PM.

                    Comment


                    • Re : Property Price Trends in Chennai

                      Originally posted by wiseman View Post
                      BigBear,

                      In fact back in early 2008 I had predicted that HCL Tech would go from 300+ to double digits. Everyone laughed (I mean the investors I advice). When I recommended at 85 (most people I adviced asked me at 85 why did I not force them to sell at 300+) that people buy HCL tech again they told me that I was mad and that the world was going to end! Today, the same people are telling me, "why didn't you force us to buy at 85!!!"

                      Like it or not, people behave like that when in a mob. This mob behavior is what leads to cycles of extreme positive and negative mental outlook. A person who recognises this can track it and use it to very great advantage - which is what I propose to do ...

                      As you can see, back in March there was extreme pessimism (actually in Oct 2008 it was worse). Today, there is extreme optimism without much change in reality on the ground. What has changed is the mood in society. It is this mood that drives prices and since they happen in cycles, you see cyclicity in price movement.

                      What people do not seem to realise is that there are short, medium and long term cycles. Then there are very long term and super long term cycles spanning 100s of years. Most people are looking at the short term cycle (Mar-Oct) and are thinking this bear market is over (maybe in India it is a consolidating bear market where prices may not completely crash, but in the US it is in a crash-type bear market due to fundamentals being extremely bad). And the US does have significant impact on other economies of the world when it crashes!

                      If you notice, this recent "growth" is happening on the basis of a low base effect (as 2008 saw significant lows in production and consumption, dividing by a low number gives a high result) and a rebuilding of inventory in the hope of continuing growth and an end to recession.

                      But this is not what the RBI and the FED are stating. They are saying that real demand numbers continue to be towards the lower side and there is not great strength in them so far! And that the Stimulus should in no way be removed. This stimulus is what is propping up the world's economy and the damaging part (the high-risk derivatives business) is being merrily continued by the global thieves - watch JPM show imprived performance mainly due to this trade). So, in fact, the world is in a more precarious state today than it was in 2008. And when this bullish rally ends (as I expect it to pretty soon), pessimism will come riding back again as reality of the huge risks we carry return).

                      If you take the view to the 20000 ft level we see that we are in a longer term bear and will see a correction of large proportions soon. At the bottom of that correction I expect to see RE company share lower (or at least near their original lows, Unitech near 20, Sobha near 80, etc). This will happen when this short-term buying will end and the next wave down will see these companies going into another business-winter with an even weaker cash position and continued disinterest from buyers.

                      If you are willing to be dispassionate about it and track the decline, you will be one of the very few to have cash to buy both peoperty as well as stock (in fact even Gold and Silver) at super bargain prices again. My hope is that Unitech will one day come to single-digit prices and then it is a great buy!

                      Till then, its okay for the mob to think we are crack. Ultimately, its the cash in bank which matters!!! And holding property and other assets bought at historically low prices!!!

                      cheers
                      Well said Wiseman and I think I will be on the same belief myself.

                      Looking around in the US and Europe, majority of the countries had a freefall of the property / real estate. Things are picking up after the price levels have bottomed out and this is a fresh start, something like after a forest fire new crops growing.

                      I dont think India is much different to any other country with respect to basic economy. Looking at todays papers, Mumbai and Delhi falls under least expensive cities in the world and then the basic question is why must the property prices alone stay in par with other developed countries.

                      To put thinks into perspective again, 1 cr rupees is 220,000 USD and one can get a good decent house + land for this cost on a nice sub-urban where the country itself has huge facilities.

                      What makes land in India more precious in comparison with places like Singapore?. Even in Singapore, for the same amount, ( 310 SGD ) one can buy a decent 3 bedroom apartment in a multistorey building with all facilities and price of Rs 2500.00 for carpark per month.

                      Are we all in a dreamland?

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