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Value investor- India mid & small caps

Bhaskar Chakraborty

Thematic (Sector/Industry)

India Real estate / Thematic (Sector/Industry)

<ul>
<li>India’s BSE-Realty index rallied 133% over CY2017 on the theme of RERA induced consolidation and low interest rates</li>
<li>Telling signs of poor demand highlighted by premium developers like <a href="https://www.smartkarma.com/entities/7188" target="_blank" data-smartkarma-citation="entities:7188:1">Oberoi Realty Ltd (OBER IN)</a> and <a href="https://www.smartkarma.com/entities/3971" target="_blank" data-smartkarma-citation="entities:3971:1">Godrej Properties Ltd (GPL IN)</a> offering subvention schemes on completed/near-complete projects</li>
<li>On the ground, RERA has slowed down construction, GST has increased home ownership cost by 7-8% further delaying demand revival</li>
<li>Home loan rates have started to move up after 5 years of decline</li>
<li>Players like <a href="https://www.smartkarma.com/entities/13916" target="_blank" data-smartkarma-citation="entities:13916:1">Kajaria Ceramics Ltd (KJC IN)</a>, <a href="https://www.smartkarma.com/entities/9158" target="_blank" data-smartkarma-citation="entities:9158:1">Havells India Ltd (HAVL IN)</a> and <a href="https://www.smartkarma.com/entities/5195" target="_blank" data-smartkarma-citation="entities:5195:1">Cera Sanitaryware Ltd (CRS IN)</a> paint weak outlook of real estate construction activity over FY19</li>
<li>Real estate transactions hit 8-year lows in FY18. Worst affected are NCR, Chennai and Mumbai with unsold inventories of 4-5 years and few new launches. We do not expect property markets to revive in FY19 given the over-supply situation, the low affordability and cash constraints being felt by the developers.</li>
</ul>


India’s BSE-Realty index rallied 133% over CY2017 on the theme of RERA induced consolidation and low interest rates
Telling signs of poor demand highlighted by premium developers like Oberoi Realty Ltd (OBER IN) and Godrej Properties Ltd (GPL IN) offering subvention schemes on completed/near-complete projects
On the ground, RERA has slowed down construction, GST has increased home ownership cost by 7-8% further delaying demand revival
Home loan rates have started to move up after 5 years of decline
Players like Kajaria Ceramics Ltd (KJC IN), Havells India Ltd (HAVL IN) and Cera Sanitaryware Ltd (CRS IN) paint weak outlook of real estate construction activity over FY19
Real estate transactions hit 8-year lows in FY18. Worst affected are NCR, Chennai and Mumbai with unsold inventories of 4-5 years and few new launches. We do not expect property markets to revive in FY19 given the over-supply situation, the low affordability and cash constraints being felt by the developers.


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