Linkfest:Jan 15, 2013

Some stuff that I am reading today morning:

TCS beats street estimates with 26% jump in Q3 profits (BusinessLine)

It’ll need a miracle to escape stagflation in 2013 (Firstpost)

TCS has given 24000 offers on campus (FE)

BKC neighborhood to get elite residents (Mint)

Making a killing by selling pomegranates (BS)

Why is Narendra Modi opposed? (Centreright)

The purpose of this site (TRB)

Want lower returns?Try sectoral timing (RickFerri)

The dark side of numbers (AswathDamodaran)

6 provocative predictions for 2013 (DailyReckoning)

Is the clock ticking for Mumbai real estate?

I had earlier wondered if Mumbai real estate is in a bubble.Now, new signs are emerging that the market may be cracking.

Howard Marks of OakTree Capital in a masterpiece letter to his clients says that the downcycle of risk (or end of a bubble) begins when “Once the last potential buyer has bought, there’s nobody left to take the prices higher”

It appears we have reached that stage in Mumbai realty.Many realty companies in Mumbai (including listed ones) have started offering a buyback scheme.

The scheme works like this:

The builder has a rack rate of say 20000 Rs (USD 367) per square feet.Any retail investor/ordinary broker who approaches him is quoted this price.

But he offers a sweet deal to the High Networth Investor.

The builder sells the investorĀ  commercial/residential/retail space in his project of say 5000 sq feet @ 14000 Rs (USD 257) per square feet.This entails an investment of around 7 Crores Rs. (1.28 Million $)

After two years, the builder buys back the property from the investor at a higher price say 20000 Rs (USD 367) per square feet.The investor gets a cool 3 Crore Rs profit (550,000 USD) on his 7 Crore (1.28 Million $) investment.

Of course, I am oversimplifying things here by ignoring brokerage, legal,registration,stamp duty,society,maintenance and other charges.

But the drift is clear,the investor gets a damn good return for bailing out the developer.

But the question arises, why are builders resorting to buybacks (or IPOs) ?The answer is simple…the last potential buyer in Mumbai for 2.5 Cr+ (458,000 USD) properties has already bought.

So the rush for buybacks and IPOs.

There is one other factor-elections. 2014 will have both the Maharashtra assembly and general elections.Last time around, builders had to do a fire sale to clear inventory to raise money for their political patrons.They probably want to avoid a similar scenario this time around.I find it interesting that the buyback entails the builder buying back the property in 2015 i.e. when the elections are over.

So is the clock ticking for Mumbai realty?I think the party is over for now.

Brokers turn realtors

In an interesting turn of events, Indian equity brokers are turning themselves into real estate brokers.

Not a day goes by, when one does not get an email from brokers hawking a real estate project.

Some of the equity brokers who have become very active realtors are ICICI Direct, Kotak, Karvy, SMC, Indiabulls etc

It would be interesting to see how much of their income comes from realty brokerage as opposed to equity brokerage

Portfolio of Prof. Mankekar

This post is in continuation of my coat tailing series (see here).

Prof. Mankekar is a well known celebrity investor in the Indian Capital Markets.The investments of the Mankekar family are in the name of Prof Mankekar, his wife Laxmi and his son Kedar. (Prashant has pointed out that some investments are made in the name of Om Kedar Investments also)

His latest holdings as on Sept 2012 as per stock exchanges websites is given below:

Company Name Entity Name # of Shares %
Wockhardt Laxmi Shivanand Mankekar 2175506 1.99
MT Educare Laxmi Shivanand Mankekar 1058015 2.68
MT Educare Shivanand Shankar Mankekar 882489 2.23
Shasun Pharma Shivanand Shankar Mankekar 2100000 3.81
Strides Arcolab Shivanand Shankar Mankekar 2215163 3.77
Claris Lifesciences Shivanand Shankar Mankekar 1132033 1.77

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