Indiabulls Property Investment Trust, slid 10% on its debut on the SGX, trailing the movement of the exchange’s benchmark index and mirroring weak investor appetite for real estate stocks
Other real estate stocks listed on SGX have taken a beating. Real estate companies are finding it extremely difficult to get funding as investors are sceptical about the bouyancy in the Indian real estate markets. A number of Indian companies such as DLF, Unitech, Embassy Group had postponed their plans of Reit but have recently showed signs of filing for a Reit listing in SGX.
A lot of projects of real estate companies have been put on hold due to lack of funds. Developers have been nearly cut-off from bank borrowings after the RBI cautioned against excessive lending to the sector. Interest rates have been scaled up to 14% - 18% for such borrowers. Private equity funding has become equally difficult to obtain due to the slowdown of the real estate sector bringing a mismatch to valuations. I came across a news ticker today that said Kotak Realty Fund and Omaxe project deal has been called off.
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HDFC chairman Mr. Deepak Parekh has advocated the need for a real estate regulator in an attempt to protect the interest of property buyers in the country. The real estate sector has been growing rapidly and is a sensitive sector given its strong inter-linkages to other industries in the Economy. Mr. Parekh feels that developers rarely offer any warranty for the flats and in case of disputes, consumers have only the consumer or civil courts as recourse - both of which may take ages before a case can even come for hearing. Delays in handing possession of the property to a purchaser have become the order of the day. Needless to say, the developer community is free from any liability in case of any delay. Parekh conveyed that the subprime crisis has also brought to light the fact that there is no substitute for cautious and prudent lending. The basic tenets of home financing are simple - lending must be done according to earning capacity, which is on a cash flow basis and not on asset values.For more view- http://realtydigest.blogspot.com/
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