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Realty stocks will offer long-term benefits


Realty stocks will offer long-term benefits

Last updated: August 4 2007
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  • Realty stocks will offer long-term benefits

    Analysts and brokers are of the opinion that investment in the realty sector will ultimately prove to be beneficial.

    Of late, real estate stocks have shown huge volatility in the market, often gyrating more than the swing in the BSE sensex. But analysts and brokers say if one is ready to withstand short-term jitters like the current volatility and interest-rates jitters, investors in this sector would be rewarded handsomely over the longer haul.

    Real estate companies with pan-India presence are better placed to weather cyclical nature of the industry, analysts said. While investors are slowly waking up to the possibilities of investing in good realty stocks, companies from these sectors have also been tapping investors through public offers. Over the last one year, real estate companies have mobilised nearly Rs 17,000 crore from the domestic market, making this sector the top sector in mobilising public money. And if one also takes into account funds raised from abroad, the real estate sector could almost equal the same raised by Indian banks. The opportunities that exist in the country's real estate sector are also generating huge foreign investor interest.

    In India, the demand for homes is about 3 million dwellings per year. Given the demand-supply scenario in this sector, in the long term, there's money to be made here. And going forward, sector leaders with country-wide presence should trade at premium to others.

    As of now, the recently listed DLF Ltd, and Unitech, with their pan-India presence are taken to be sector leaders. In addition, a host of other comparatively large realty companies, that include companies like Mumbai-based HDIL that closed its IPO recently, south-based Purvankara Projects whose IPO closes on Friday, and Parsvnath and Sobha Developers, both went public in the last one year, are among the leaders in the industry.

    Globally, in the developed markets, realty firms contribute nearly 10% of the total market capitalisation, and market players here are hopeful that the Indian market too will slowly move in that direction.

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