Real estate is a tricky business and you need to understand it very well before jumping in. Across the globe the sea coast property line has almost 10 times more value then the one that is not located on the coastline. That is yet to happen in India. SO if you have an Uncle who stays on Worli sea face he will be at least 3 to5 times wealthier over the next few years.
Coming to property stocks. DLF would be well discovered but shall provide stability so you may wait for that apart from that I do not understand any pure property plays that I could recommend to you A few rounds doing the market are:
Hindustan Motors: they are planning to sell their Uttarpara land and that could be significant
Bombay Dyeing: The company owns a lot of mill land in Mumbai and as prices go up these stocks could be bid up
Century textiles : A very complex management to decipher. they were planning to shift to Gujarat and sell off their land but then they decided against it and are now planning to go for it again.
Bata : They are planning to develop a township near Kolkata but that is all.
Unitech and Kalpataru are companies that I do not understand except that I can see them but seeing is not believing every time..
Now for all the property plays it would be better to buy companies that have operating businesses dependent on the land bank. For example if property prices go up so would the room rent so why not buy Indian Hotels.
Also if you buy any of the Hindustan Motors, Century Textile etc there could be a number of ifs and buts:
1) We all know how property is sold off in India 60:40 or 70:30
2) If (1) above is true how would the minority shareholders be benefited.
3) What is the option that this property sale will not be redeployed in useless expansions.
4) Will the company give back this amount as dividend?
5) Property land bank plays are one time kickers over a longer term stocks go up because of operating businesses not because of property deals.
6) Except if you are invested for a short period of time you need to play the greater fool theory in property companies. I am not aware of any property play anywhere in the world where the final climax did not result in a lot of bloodshed.
I would suggest that if you are bullish on real estate you may invest in a property directly in places like Pune, Noida, Nasik, Chandigargh (the second line upcoming cities in India)or if you are looking at a small investment wait for any REITS to open up in India(Real estate investment trusts). They operate like quasi property mutual funds. But it is better to buy a property rather then property companies since there are a lot of grey areas
Edited by basant - 20/Aug/2006 at 11:23pm