Invest in their
flats,and you will get rich.But, invest
in their shares and you will be poorer.
Unlike in other
sectors, values of shares of listed real estate companies do not reflect the
growing value of their products.
Sample this:
Investments made in
shares of real estate companies such as Delhi-based Unitech and DLF Ltd,
Mumbai-based Indiabulls Real Estate or / Bangalore-based Purvankara in 2008
would have crashed to half or / to a fifth of their value by now whereas in the
same period, returns from investments made in houses built by the same
companies would have risen anywhere between 50 % & 150 % / or more.
If one had bought a
flat in any Gurgaon-based apartment building of DLF Ltd Indias biggest builder
in 2008, the investment would have, by now, appreciated 60% to 175 %.Had the
same money been used to purchase DLFs shares the same year, that investment would have eroded to just 20
%.
Investors of Unitech,
Indiabulls & other real estate firms would have a similar story to tell.
The ET Realty Index
has been the worst performer since fiscal year 2008 in comparison to all other
indices falling 77 %.
Stock prices are
sensitive to a number of factors negative news about industry, regulatory
changes, interest rates for construction finance, housing loan rates, future
earnings expectations, says Mr. Ajay Chandra, MD, Unitech.
On the other hand,
house prices are a factor of demand in the market & state of the micro and
macro economy, he adds.
Properties are
better-performing assets than stocks of real estate companies that built them.
Buy their houses rather than their stocks, says Mr. Sanjay Bansal, who runs
investment bank Aurum Equity Partners.
Src: ET
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