New Delhi: India’s real estate market has caught the fancy of foreign investors, who have raised their stakes in a majority of listed realty firms although some analysts believe these stocks are among the most expensive in the world.
An analysis of holding patterns of foreign institutional investors (FIIs) in 22 major realty firms shows that most of them raised their stakes in the April-June quarter compared with the previous quarter.
FIIs increased their stakes in 15 firms, including Unitech, Ansal Housing, DS Kulkarni and Indiabulls Real Estate. They also lowered their holdings in seven—DLF, Atlanta, Era Construction, Lok Housing, Mahindra Gesco, Madhucon Projects and Unity Infrastructure.
The country’s real estate sector has seen a boom in recent times, led by an increase in people’s purchasing power thanks to a fast growing economy, relaxed lending norms by banks and housing finance companies, and growth in the retail and information technology sectors.
The share-buying by FIIs in realty companies comes at a time when global investment services firm Standard & Poor’s has said real estate stocks in India are the most expensive and give lower returns than those in most emerging and developed markets such as China, Singapore, Hong Kong and Australia.
A comparison of the price to earnings (P-E) ratio of stocks from various countries shows that valuation of property stocks from the US and the UK moved lower, while those from emerging markets such as India continued to grow.
The P-E ratio—a company’s share price divided by its per-share earnings—is considered the valuation benchmark of a stock, where a higher ratio indicates an expensive stock, while a lower ratio signifies a cheaper stock.
FIIs consolidated their stakes by an average of 1-2%, except in Indiabulls Real Estate, in which their holding jumped 6% to 44.96% on 30 June, from 37.34% at the end of previous quarter. Their holdings in Ansal Housing rose by more than 2% to 17.53%, while their stake in IVRCL Infrastructure was up 3% to 61%.
Other realty firms such as Unitech, Simplex Infrastructures, Nagarjuna Construction, MSK Projects and GMR Infrastructure witnessed a marginal rise in FII holdings.
FIIs generally sell a firm’s shares when they are at record high levels, while they buy shares when they are at low levels, an analyst said.
The current analysis confirms the trend as the seven companies in which FIIs decreased their stakes were trading at higher levels than their March quarter price, except Mahindra Gesco, whose price decreased in the June quarter.
The Bombay Stock Exchange’s benchmark index, the Sensex, has risen by 1,578.41 points and FIIs poured in more than Rs200 crore in the April-June quarter, according to data available on the Securities and Exchange Board of India website.