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Will real estate stocks experience fatigue?


Will real estate stocks experience fatigue?

Last updated: August 13 2007
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  • Will real estate stocks experience fatigue?

    The Indian real estate sector has raised equity worth USD 10 billion in the past one year of which 60% has come through public offerings in the domestic and foreign markets.

    A stunning USD 3.45 billion of this amount has come in the past month alone and that according to CLSA, could lead to a fatigue amongst real estate stocks.

    During the last month alone real estate companies raised USD 3.45 billion from the equity markets. These include realty majors like DLF, Omaxe, HDIL and IVR Prime. However, Purvankara the seventh realty IPO to hit the market last month was faced with a cold response and forced to revise its pricing downward. While this could be attributed to the current volatile state of the market, according to financial research analysts it could just be the beginning of an IPO fatigue in the real estate sector.

    There has been a froth in the real estate space for some time. Over the past two years, now that may be dying down even FIIs and foreign institutions who simply had to invest in real estate are stepping back. They have to watch their redemption, they have to put their money to work and see if the valuations are fine. A year ago merely a handful of property companies were listed. Today there are over 35 listed companies in the property business with a total market capitalisation of USD 70 billion.

    According to various reports, over the last 12 months 23 real estate companies raised USD 4.4 billion through public equity offerings. In addition USD 2.6 billion was raised by Indian companies listed primarily on London's AIM and the recent Singapore listing of Ascendas Reit. Close to USD 2 billion has been raised through private equity

    The choice of realty stocks is only expected to widen with companies like Emmar MGF, Godrej Properties, Kotle Patil and Lodha being just a few who have aggressive fund raising plans. It remains to be seen whether there will be enough appetite for real estate stocks in the coming months.

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