BOAML
India Real Estate
Sell Virtually Everything
50 bps cut = 3-4% price cut only
Our economist expects a 50 bps rate cut in 2QCY12. Developers are holding
prices primarily hinged on this rate cycle turn for demand to return. However, our
analysis shows a 50 bps rate cut equates to mere 3-4% reduction in cost of
acquisition; which we believe will not be enough to attract demand.
Waiting for 100bps cut in FY13 might be too late
We believe, with poor cash flows, developers will disappoint the market on volume
and cash flows in FY13 also if they decide to wait out for demand to return once a
total of 100 bps is cut in FY13.
Time correction versus price correction
There seems a consensus opinion built-up around possibility of real estate prices
under-going time correction rather than price correction. We believe the same is
possible for affordable cities of Bangalore and Noida as prices remain stable in
FY13 and 100 bps rate cut reduces cost by 7-8%. Developers in both cities are
offering 3-4% discount to close deals. However, we believe the city of Mumbai will
have to witness a double digit correction beyond the 7-8% reduction due to rate
cuts. Anecdotal data shows discounts of 6-8% available depending on the project.
History says only price correction can do the trick
We believe the market will be disappointed with operational performance of real
estate firms, if prices stay sticky leading to poor volumes. Past cycles show stock
prices lag price correction but lead volume recovery by a quarter to two.
Volumes with sound realization remains critical
3QFY12 witnessed volume recovery but at lowered realization as developers
continued their focus on affordable housing to weather tough market conditions.
We believe new launches (mid-end to high-end) in core markets (at discounted
prices) will help improve cash flows.
Current rally does not corroborate with physical market
We believe the current rally in real estate stocks could be overdone and
recommend caution as the current rally led by global liquidity does not corroborate
with the physical market trends wherein 1) sales volume continue to wilt, 2) unsold
inventory remains high 3) balance sheets remain stretched 4) asset sale progress
slow 5) capital availability still tight and 6) execution has slowed.
Safe Harbor Statement:
Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.
Nothing in this article is, or should be construed as, investment advice.
--
For Anything related with Stock market be Online at
http://www.niftyviews.com/
Get free updates on your mobile phone. Sms "Join TSR " and send to 09223492234
FOR TRIAL STOCK/NIFTY/OPTION CALLS
You received this message because you are subscribed to Google Group "STOCKRESEARCHER" group.
To post to this group, send an email to STOCKRESEARCHER@googlegroups.com
To unsubscribe email
Stockresearcher-unsubscribe@googlegroups.com
for more info visit
http://groups.google.com/group/STOCKRESEARCHER?hl=en-GB
.
This is Not a Spam Mail.
Disclaimer :-
"The opinions expressed by the members on this board are based on
their individual experience and perceptions and to share information
with other members with the best of intentions to help fellow members
in investment decisions as equity investment is a risky venture."
Posts
0 comments:
Post a Comment