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reema
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Quote reema Replybullet Topic: Investing in property & landbank plays?
    Posted: 20/Aug/2006 at 8:53pm
Globally people have made big money in real estate - (DOnald Trump) what are the opportunities for an investor in real estate .Is it better to play it with a pure real estate play that owns and sells land or which leases land on rental basis or through a company that has an opertaing business but owns real estate? Can you recommend any such shares that you think is deserves to be looked at.
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Quote Ambarish Replybullet Posted: 20/Aug/2006 at 9:54pm
Real estate has always given money to its owner sooner or later, more later than sooner, and is agood idea if you are going for a long term investment but to invest in the stock of real estate company is not a good idea as they are money guzzlers due to huge establishment expenses 
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basant
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Quote basant Replybullet Posted: 20/Aug/2006 at 10:23pm

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
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Quote manishdave Replybullet Posted: 20/Aug/2006 at 11:17pm
I agree with Basant. Buy companies with operating income or potential of operating income which has more visibility. Conversion of real estate into cash takes years and sometime decades. So no real visibility. And then distribution of that is even poor visibility.
 
VSNL has 773 acres prime land in metros. It has been identified as land to be sold. Nothing is happening since 2002. Reema has mentioned HOCL in other topic as T/O. Company needs cash badly. They have huge real estate but again nothing is happening since long time.
 
Real estate is no different than other investment. If you buy at good value you make money. Some people say real estate can not go to zero. But lot of people who bought real estate at high margin, it went to negative. Lupin suffered very badly by investing in real estate.
 
For matter of Donald trump - he has not made money buy investing in real estate, he has made money buy cheating banks. He was bankrupt and then loans were restructured. He pretends that he is smart businessman but the fact is he his horrible businessman. In reality he is very good showman.
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basant
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Quote basant Replybullet Posted: 20/Aug/2006 at 11:25pm
Is the VSNL land not a part of the listed company. I was told that the govt split the company at the time of disinvestment into two companies Land & Investments + Operating business.
 
Also could you fill us in on Donald Trump. That came as news to me.
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Quote manishdave Replybullet Posted: 20/Aug/2006 at 2:29am
On VSNL:
Land was spun off in other company. But the deal is whenever the land is sold shareholders(except tatas) will get thier share as it was part of company. Tatas will transfer their share of land to govt coz that was the deal when they bought. So that money will go to Govt. I think even those who subscribed for tata's open offer will get their share and not tatas. If we buy VSNL we still have that value built-in and not discounted.
 
Here is link for reference.
 
 
Now value of land would not be less than 3000-4000cr. In Delhi Greater Kailash they have abt 60 acres. Land value there is Rs1lac/Sq yard. They also have other 600 acres but that is being used for antenna farms or something like that. But this 773 acres is just ready to sale. In this hot mkt it wont take more than 4 days to sell but govt is sitting on it since 4 years.
 

VSNL owns about 1,400 acres of land across seven cities in the country. In Delhi, VSNL owns one acre in Connaught Place, 127 acres in Greater Kailash and 126 acres in Chattarpur. In Mumbai, it owns 0.3 acres at Fort and 1.8 acres in Prabhadevi.

In Pune, the company has 774.5 acres in Digi and 228 acres in Arvi. It also has 75.4 acres in Ahmed, Dehra Dun. In Chennai, 85.94 acres of land has been declared surplus

Donald Trump:
This link is enough but there is still more.  
 
He is US version of Mr. Mallya.
 
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Quote Ajith Replybullet Posted: 20/Aug/2006 at 7:58am
Real estate industry is cyclical and analysts tend to forget that as they did in the case of software in 2000.
  Also there was the listed SI Property ,the then leading developer of south India which went bust in the property crash of1995 trying to expand rapidly in the face of entry of players like Great Eastern develepors. (lesson-slow and steady is often the way to go forward and/or business operations/risks must be aligned with networth of the company)
  Ideally one would like a solid business,a shareholder-friendly management,some terrific property and valuations that do not take into account the kicker that property  will give.
  I have some JK Investo
because I think apart from the Thane property the  other businesses have long-term potential and valuations are tempting.Management must unlock value by restructuring and be more agressive  though they are known to be honest.


Edited by Ajith - 20/Aug/2006 at 9:09am
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prosperity
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Quote prosperity Replybullet Posted: 05/Oct/2006 at 10:46pm
Manish, Basantji,
 
Now that the VSNL land value creation news is OUT .... Is VSNL a buy for making quick bucks ??
 
LMK .. coz one who can act fast can make the buck faster !
 
 
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