Monday, June 02, 2008

Best time for vault owners

Multi-triggers that burst the myth of a rising real estate market have begun to bite the landlords. Too much of froth and bubble that got built in the real estate sector is now being flushed out.

Those who argue that land prices will remain stable because of its limited supply should be asked to take a look at inflation numbers. Ask Wadhwa Builders that paid Rs.46,000 per sq.ft at a record land auction at Mumbai’s Bandra-Kurla Complex in November 2007. Compare that with the last auction at BKC, by Jet Airways, where rates tumbled to Rs 32,000, a drop of a whopping 30% in just about four months.

I ran a check on some prominent real estate stocks. The BSE realty index is the worst performer this year, having shed 51% of its 52-week peak reached in January. The country’s largest property firm DLF’s scrip lost 54% while Unitech shed 64% from its peak. The scrips of Delhi-based Parsvnath and Omaxe have lost 68% each since January. Not just the sellers were smart. Imagine the windfall to govt. from stamp duty and registration charges at the peak price! If they could wait for another 6 months, the costs of registration Wadhwas paid for that deal will outgrow the cost of the land they got.

Best times for vault owners…?

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