A slump in the Indian real estate market has cast a shadow on the property funds listed on London’s Alternative Investment Market (AIM). All the five India-focused property funds floated by local developers have been under-performing in the past two months.
On an average, they registered an 18% negative return over the last two months. The market capitalization of all the Indian developers has eroded around 60-85% during the past few months and it has had its impact on the AIM market.
Unitech Corporate Parks, the AIM-listed entity of the Delhi-based real estate firm Unitech, has been the worst performer with 27% negative return; while the Mumbai-based Hiranandani group’s Hirco has suffered a 23% fall.
KPMG executive director Jai Mavani said, “This is largely due to the environment and has nothing to do with a particular developer. The projects offered by the AIM entities are largely construction and development rather than operating ones. Currently, they are not generating cash. This is the reason why these funds have been lagging behind since the time of their listing”.
The India-focused funds listed on the Singapore Stock Exchange tell a similar story. The recently-listed Indiabulls Properties Trust is also trading below its issue price.
According to a recent Credit Suisse report, despite developers’ assertions that prices remain at an all-time high, a deeper look shows that all is not well with the sector. Recent land auctions, discounts being offered by developers, cancellations and prices in the secondary market all point to an impending price correction.
It added that mortgage disbursals, stamp duty and registration fee collections also indicate a slowing demands. Developers are finding it increasingly difficult to raise funds and distress sales are on.
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Rising interest rates and a falling demand may dent the realty market in India. However, the long-term prospects for the sector continue to be good, feels the industry. There are around 21 India-dedicated real estate funds that are raising money in the international market. In the next nine months, nearly $7 billion will be entering the country through various India-dedicated funds. While long-term players are looking at India, short-term players based in the US and Europe, such as the hedge funds and private equity players, are more interested in their local markets.For more view- realtydigest.blogspot.com
While the bears are ruling the stock market, there is a different asset class where the bulls are keeping away. Speculative investors in real estate market are retreating, at least in the Delhi-NCR region.
Some foremost developers based in the region say it is becoming more and more complicated for them to sell flats at launch stage due to lack of interest from speculators. This reflects on the inherent demand structure in the real estate market.