Pune’s real estate unsold inventory reaches to 2.8 lakhs units

Pune real estate seems to be hit badly by slowdown as demand lowered in the last one year. According to Gera’s Pune Realty Report for January – June, 2015, the city has witnessed unsold stocks (inventory with developers for sale) of 280,913 units across 3067 projects from 245,639 homes over 2761 projects in the last one year. The unsold inventory is valued at Rs 48,526 crore. Some of the main reasons for the slowdown include a supply-demand gap.

Gera’s Pune Realty Report findings

3,067 live projects tracked after a listing exercise covering a radius of 30 km from Shivajinagar.

Slowdown in price appreciation from 12.47 per cent for June 2012 – June 2013 to 10.03 per cent from June 2013 – June 2014 and down to 3.33 per cent for June 2014 – June 2015.

The Budget Category (where prices presently are below Rs 4,247 per square feet) has seen the highest increase of 125 per cent in unsold inventory from 18,019 unsold units to 40,814 unsold units.

Only 24.55 per cent of the stock added between January 2015 and June 2015 is within PMC limits, indicating that most of the incremental stock is added outside the PMC limits. This will lead to declining revenues by way of development charges and premiums for the PMC.

However, prices will not see any significant correction unless something drastic happens.

Regulatory impact will further push prices up when the time is right (Real Estate Regulatory Act, Maharasthtra Housing Act)

According to the report, the gross stock has significantly risen by 14.36% in the past 12 months with a net addition of 35,324 homes across 306 additional projects, the unsold stock (inventory with developers for sale) in the same period has shown a steep jump of 36.85% from 66,350 homes a year ago up to a record 90,799 homes at present. The unsold inventory is valued at Rs. 48,526 crore in pune.

The value of unsold Flats across the top seven cities of the country at the end of June has been estimated at a whopping Rs 4 lakh crore, with few signs the inventory will be cleared anytime in the next five to seven years. At 7.5 lakh, the number of flats in the mid-priced range is virtually the same as it was at the end of March, this year, which means sales have come to a standstill.

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In addition, there are 50,000 luxury apartments, priced at an estimated Rs 1 lakh crore, lying unsold in Mumbai alone. “Developers are now reducing the sizes of the apartments to make them more affordable.

PropEquity estimates there are close to 53,000 unsold apartments priced over Rs 1 crore in the Mumbai Metropolitan Region (MMR) alone. For the remaining seven cities together, this would be over one lakh units.

The number of quarters required to exhaust the current unsold inventory in Guragon, has risen to two years from three quarters in 2012, estimates Bank of America Merrill Lynch. The brokerage believes the absorption rate in Noida today at 3.7% is the lowest in the last eight years. This is because investors who held the housing market seemed to have deserted it given poor visibility on timely delivery.

Five debt repayment strategies that could backfire on you.

Being neck deep in debt is never a happy feeling. Unfortunately, there is no magic wand that can make you debt free. If you are desperate to get out of debt you will have to cut corners and be patient till you repay your dues.

Quick fix solutions almost never work in life and it is no different for debt repayment either. Here are five debt repayment strategies that could backfire on you.

1) Dipping into your retirement savings

There is a reason why financial advisers maintain that you must start saving for your retirement as soon as you start earning. If you have been doing so little by little and building up a corpus to serve you well in your golden years, you should leave it undisturbed under all circumstances till you reach your retirement age. Paying off unsecured debt with your retirement savings is a bad idea and your entire financial plan may go haywire because of the same.

2) Milking your home equity

When you are in debt and have a roof over your head to call your own, you may be tempted to refinance your home or avail of a new loan at an amount that is higher than the old loan. For instance, if the value of your property is Rs 20 lakh and you owe your lender Rs 13 lakh, you can refinance Rs 15 lakh and take out Rs 2 lakh in cash.

You may think of your home equity as a temporary lifeline, but you are actually exposing yourself to a higher risk in such a case.

In case a mishap results in the stoppage of your regular flow of income, you may stand to lose your home.

Trading one debt for another may only be justified in case you are looking at re-adjustments in your equated monthly instalments, or EMI, or you want to avail of a lower rate of interest. Thus, using the refinance route to pay off your unsecured debt is never a good idea.

3) Transferring your balance to a new credit card

This is another case of a debt swap that people think will help them get out of debt faster. A credit card issuer may be luring you with “lower rates” but keep in mind that those lower rates may be introductory rates to lure in a customer and are applicable for the first few months only.
Besides, there is a processing fee that is usually 1-2% of the total outstanding amount being transferred onto the new card.

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You may think that you are debt free when you receive a cheque from your new card issuer to clear the loan of your previous card issuer, but that is in fact a myth. Your debt is only transferred.

If you cannot curtail your spending habits and continue to be reckless with your new card, you will land up with an unmanageable debt pile once again.

4) Borrowing money from friends or family

So you have a very supportive family on a group of friends whom you can count on for just about anything in life. Good for you! But do bear in mind that when money gets in the way of relationships, even the best of relationships can get sour.

Think very carefully before asking your support system for money to bail out of your debt pile.


5) Filing for a settlement

When nothing seems to be working and you are at your wits end, you may decide to “settle” your loan or credit card debt. Your bank will accept the settlement of your loan and will not harass you for further installments, but it does have repercussions. The price you pay will show up in your Cibil report and impact your Cibil score negatively.

Besides, this settled loan or credit card debt will affect your Cibil score for the next seven years and remain on your Cibil report for ever, thus making it impossible for you to avail of any kind of credit facility in this interim.

No bank would willingly give a loan to you if you have settled your loan or credit card dues once.

As you can see now, these hacks that you thought could get you out of a debt trap, could actually be akin to tying a noose around your neck.

Instead, take a practical approach and see if you can liquidate some assets or investments to pay off your dues. If that does not seem possible, take up some extra part time jobs that will supplement your income. Keeping your head down and working hard through this period of crisis will see you through.

This article is authored by Rajiv Raj.

Meaning of the term Volatility Index ( VIX ) / Fear Index

Volatility Index (VIX) is a key measure of market expectations of near term volatility. As we understand, volatility implies the ability to change. Thus when the markets are highly volatile, market tends to move steeply up or down and during this time volatility index tends to rise. Volatility index declines when the markets become less volatile. VIX is sometimes also referred to as the Fear Index because as the volatility index (VIX) rises, one should become fearful or I would say careful as the markets can move steeply into any direction. Worldwide, VIX has become an indicator of how market practitioners think about volatility. Investors use it to gauge the market volatility and make their investment decisions.

NSE Volatility the VIX index has reached the level of 20 and above. Given that market experts are raising fears of a major correction in the coming days. So, traders need to be cautious before trading in the stock market .

What is the VIX indicator

VIX is the indicator that tells how many and what kind of market volatility. VIX level of below 20 is seen as stability to the market, while a figure above 20 indicates high volatility. NSE VIX is around 28.13 on 24th August. Nifty dropped 491 points on August 24 was closed when the VIX 17 was more than 28, Change in percentage is 64.36 % .

NSE VIX on today is 28.71 ,Nifty dropped nearly 200 points, Change in percentage is 16.76 %.

How does calculate VIX

The index of the current month and next month, calls and puts increase in average premiums and discounts are determined based on the movement of the VIX Index.

In India, value of Vix has been computed by the NSE since November 2007 based on the out-of-the-money (OTM) option prices of the Nifty. It has touched a high of 85.13 and a low of 13.04. As it is mentioned in percentages, value of Vix can never be below zero or more than 100.

Historical data indicates that India Vix has a strong negative correlation of negative 0.8 to the Nifty. This means that every time Vix falls, Nifty rises and every time it rises, it means that a fall is imminent. India Vix touched a value of 85 percent, a few days before Nifty touched a bottom post the Lehman Crisis.

India Vix has a mean of 26.65 and a median of 23.83, these figures are important for option writers and traders since Vix has a tendency to revert to the mean.

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What experts say

• Market experts say that the decline in the short term and could deepen. Accordingly, the index that measures the technical charts show that in the short term Nifty breaks below 7800 is visible. So investors should include in their portfolio of IT and pharma stocks because these stocks have always considered defensive. The sharp fall in the stock market during the staying and they usually do not see a sharp decline.

• VIX is raising fears of a sharp fall in the growth markets. Also forthcoming credit policy of RBI traders in the market are hedge their positions. IT and FMCG purchases are seeing right now, it is pointed out that foreign investors out of stocks aggressive positions are shifted to defensive stocks. This large decline in the market because the market will not go out of the money from one sector to another sector is shifting.
On fears of market volatility VIX rises.

• Find VIX moves from the fact that, before the 2014 general election results was a risk of large fluctuations in the market, the VIX was at the level of 40. August was a VIX level of 13.53, which is now approaching the level of 24. From this perspective, it is faster to 43.65 per cent. The Sensex and Nifty have broken more than 4 per cent in August. This situation indicates that the current correction in the market index (fall) could see.

VIX-year upper level

• Nifty and Sensex 4.5 per cent this year has broken. Smallcap index has declined two per cent. However, Vix has climbed 43 percent in the past month, and this year are trading close to the upper levels. Vix shows that short-term risk.

Foreign portfolio investors (FPIs) pulled out $2.6 billion from the Indian markets in August

Foreign portfolio investors (FPIs) pulled out $2.6 billion from the Indian markets in August — the worst monthly outflows since October 2008.

About seven to eight years ago, when FPIs sold equities there was hardly anyone with enough muscle to absorb the selling pressure, that too without a significant price damage. However, markets have received some cushion recently from DII buying and they been able to absorb most of the impact of FPI selling.”

Foreign portfolio investors (FPIs) pulled out $2.6 billion from the Indian markets in August — the worst monthly outflows since October 2008. In the last five sessions alone, FPIs offloaded some $2 billion worth of stock and foreigners were net sellers for 20 out of 25 sessions in August, Bloomberg data showed.

FPI AUG

In contrast, domestic institutions picked up equities in the cash segment worth approximately $2.3 billion (Rs 15,769.83 crore), the biggest quantum bought.

The selling by FPIs saw the index of blue-chip stocks fall more than 6% in August, wiping out Rs 3.01 lakh crore in market capitalisation of the top 30 companies. The rupee breached the 66-mark against the dollar to fall to its two-year low.

The outflow scenario was prevalent through out the Asia and Emerging Markets. South Korea witnessed outflows worth $3.6 billion, while Taiwan and Thailand saw FPI pulling out $1.6 billion and $1.25 billion, respectively.

Overseas funds had sold $4.36 billion at the peak of the previous bull run in January 2008, followed by $2.92 billion in October 2008 in the aftermath of Lehman Brothers’ bankruptcy that triggered the global financial crisis.

India’s GDP Growth improving likely to 7.6%

According to the report, the RBI believes India’s growth outlook is improving gradually and says the real activity indicators are backing its 7.6 percent gross domestic product (GDP) projection.

“Business confidence remains robust, and as the initiatives announced in the Union Budget to boost investment in infrastructure roll out, they should crowd in private investment and revive consumer sentiment, especially as inflation ebbs.

The RBI had, in June, lowered the growth forecast for the current fiscal to 7.6 percent from 7.8 percent projected in April, citing various risks, including poor monsoon and rising crude oil prices.

According to RBI, these are the short-term macroeconomic priorities of the central bank: focus on bringing down inflation ; work with the Government and banks on speeding up the resolution of distressed projects and cleaning up bank balance sheets; ensure banks have the capital to make provisions, support new lending, and thus pass on future possible rate cuts.

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Inflation

While the progress of monsoons has allayed initial fears, the uncertainity surrounding it continues to remain a risk. But RBI believes fears of a poor monsoon has been offset by the steep fall in global crude prices.

While the central bank expects the fall in crude to soften inflation, it hopes to see it below 6 percent by January 2016.


Fiscal Deficit

The RBI is confident of logging a fiscal deficit of 3.9 percent GDP by 2015-16, buoyed by robust indirect tax collections.

“Furthermore, plans for disinvestment need to be front-loaded to take advantage of supportive market conditions, and also to forestall cutbacks in capital expenditure to meet deficit targets,” highlights the report.

Current Account Deficit (CAD)

The central bank says the Indian economy is vulnerable to external shocks as merchandise exports have contracted through the first four months of 2015-16. While imports have remained subdued, primarily reflecting softening of crude and gold prices, the RBI expects the FY16 CAD to stand at 1.5 percent of the GDP.

China slowdown is a big positive for India

Indian fundamentals are much better than the Chinese fundamentals and the outlook for India over the next few years is even better in terms of growth which could easily surpass that of China in next 2 years.

Prime Minister Narendra Modi wants India to become a $20 trillion economy in the future and much of the emphasis by government is now moving towards pushing growth-focused reforms to revive investment cycle and push GDP growth to 7-8 per cent in the next 24 months.

India is projected to grow at 6.3 per cent in 2015 and 6.5 per cent in 2016, when it is likely to cross China’s projected growth rate of 6.3 per cent, the IMF has said.

FIIs could prefer India over other emerging markets due to moderate valuation, stable government and positive economic outlook. The business friendly policies of the new government would keep the sentiments positive towards India.

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As per Mr. Nilesh shah The world is worried that China is slowing down. China is devaluing their currency to get an edge for their exports. They can do a replay of 1997 Asian crisis on a much larger scale.

The reality is that most of the other EM currency has dropped more than Renminbi. Today’s China cannot do a devaluation of the scale with which it got away in Mid 90s.

China slowdown is a big positive for India as it pushes more investor’s to look at an alternate model of balanced growth rather than credit led growth. China’s credit to GDP Ratio is more than two times that of India.

US dollar is appreciating against most EM currencies and is putting pressure on US growth and exports. US Fed will be compelled to keep dollar strength in mind while looking to raise Fed rates. US 10 year yield is indicating the same at below 2% after a long gap. Slower rise in US Fed rates will help India to cut interest rates and attract capital flows.

There is a worry that with oil prices dropping below USD 40 world is moving in to recession or slower growth. Actually India is a large importer of commodity. We import 1.4 billion barrel of oil on a gross basis. Every USD 1 drop in oil price helps us save about USD 800 plus million in import bill. Today with oil dropping below USD 40 our incremental saving will be close to USD 16 billion plus since June 2015 high of oil prices. India is a beneficiary of dropping oil and commodity prices.

The government, unlike in the past has used oil price dividend of more than USD 60 billion to clear fiscal mess.

Currently, India is having good macro fundamentals. Even with increased government spending, the fiscal deficit is under check at below 4%. CAD is under control. Inflation is under control with WPI at negative level for last nine months and CPI at 3.8% is below RBIs target level. Indian interest rates are at a level where they can be cut to support growth. IIP growth is recovering. Benefit of improved government spending is yet to fully percolate to economy.Worlds largest fund epfo to start investment in equity.

Correction in most global markets is driven by local factors. For e.g. Chinese markets are down as they have run up significantly in last 18 months. Russia and Brazil are down due to commodity based nature of their markets. NASDAQ is down as valuation of some of their Tech Cos are showing excesses like 2000 technology boom and bust.

In summary .

Global volatility is here to stay for some time

Drop in commodity price is negative for few EMs like Russia and Brazil but hugely beneficial to a country like India

FII selling is led by oil nation’s sovereign funds, GEM funds and ETFs. It is likely to continue for a while

Domestic participation will determine the extent of drop and speed of recovery in Indian markets

We are more likely to see a U-shape recovery than a V-shape recovery as FY17 corporate earnings recovery will support markets.

Provident Fund participation can also provide additional support.

In the short term it will be futile to predict bottom of the market.

Central Banks around the world will swing into action to support markets sooner than later. Their coordinated action will soothe global volatility.

http://fpindia.in/blog/indias-gdp-reach-to-8-by-2017-world-bank/

http://fpindia.in/blog/worlds-largest-fund-epfo-to-start-equity-investment/

Buying Low and Selling High is the right strategy.

How to Decide “When to enter and when to exit” in the market.

PBV Vs PE – Which is better?

Definition

Price-to-book ratio (P/BV) – A ratio used to compare a stock’s market value to its book value. It is calculated by dividing the current closing price of the stock by the latest quarter’s book value per share.

In simple terms if a company is having 100 crores in assets with 50 crores in liabilities. The book value of the company would be 50 crores. If there are outstanding shares of 25 crores each share would represent Rs.2 (50/25) of book value. If each share sells on the market at Rs.5, then the P/B ratio would be 2.5(=5/2).

Why P/BV is a better model as compared to P/E when it comes to investment decisions

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• Price to book value is less volatile as compared to price to earning ratio.
Price to Book Value is a better indicator of valuation for the aggregate market compared to any indicator based on the current or near term profitability like Price to Earnings. The Earnings are very volatile and sensitive to economic conditions.

• Forward Price to Earnings, commonly used as valuation indicator has drawback of forecasting errors as well as undue emphasis on near-term profitability. Also the street estimates on the earnings normally tend to be more reactive to the market conditions than indicative of the valuations for the company. Price to Book in my opinion is a more stable and intuitive measure of the value which can be used across time horizons.

• Price to earnings gets impacted more by unfair accounting policies or by window dressing of company financials – So to explain, EPS can be twisted, prodded and squeezed into various numbers depending on how you do the books. The result is that we often don’t know whether we are comparing the same figures, or apples to oranges.

• Price to book value is better equipped in gauging intrinsic value of a company as it takes into account firm specific details while price to earnings ratio takes into consideration the reflection of the market’s optimism concerning a firm’s growth prospects.

• Price to book value looks at a longer time frame for indicating valuation of a stock Price to book value takes into account result updates which are released by companies on quarterly or half yearly or yearly basis and hence looks at a time frame which is much more stable as compared to price to earnings ratio.

• Book value is a balance sheet item, thereby more reliable than EPS which can fluctuate depending on seasonality, cyclicality and extraordinary items in a company.

Price to book value model helps the investor to take asset allocation calls based on market valuations.

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The Endeavour of the model is to quantitatively give an indication on ideal asset allocation based on valuations. This mechanism ensures that the investors buys when the valuation is cheap, but sells when expensive as compared to the long term mean PBV.

Remember that PE may at times prove to be a good valuation metrics for the purpose of stock level valuation assessment. But, when we talk about “aggregate market valuations”, PBV gives a far less volatile indication of overall valuation scenario.

Volatility comparison of P/BV and P/E over the selected period

1. P/BV

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2. PE

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Sensex Trailing PE Nifty Trailing PE

From the graph we can conclude that PBV ratio is less volatile and stable figure which does not get impacted by the noise around the Market as compared to PE ratio and hence acts as a better indicator for making investment decisions.

EPFO starts Investment in equity markets from Today

Employment Provident Fund Organisation (EPFO)-investment into equity markets through an exchange traded fund (ETF). The fund will be managed by SBI AMC. In the initial stages, the EPFO will invest about Rs.410 crore or 5% of its incremental deposits each month during fiscal 2016.

EPFO’s entry will bring quality long-term money into Indian equities. More importantly, it will bring better balance to equity markets at the time of foreign fund outflows.

A ‘tsunami’ coming into financial markets from domestic investors, anticipating about Rs.2 lakh crore of money over a long-term period. “The DII flows will consolidate further in the coming months as pensions funds arrive in equity markets. The pension funds have not invested even a single rupee into equities, and now they have been allowed to invest anywhere between 5% to 15%. Globally, pension funds are the biggest owners of equity markets. It will benefit both the markets and the pensioners VIEW BY Nilesh Shah, MD, Kotak AMC.

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The entry of EPFO as a great opportunity for the markets as it would get access to funds of close to Rs.1 lakh crore per year based on 10-15% investment of its corpus. It is potentially a great opportunity… Although initially the money would come through the ETF route stated by HDFC AMC

The equity ETFs market in India is at a Initial stage with total assets of other ETFs at Rs.7,322 crore as on June 2015.

The EPFO has received an average monthly incremental deposits of Rs.8,200 crore during this financial year so far. By the end of twelve months of investing, EPFO will invest close to Rs.5,000 crore in equity ETFs out of its total annual investible fund of Rs.6.5 lakh crore.

Identify the 10 largest Foreign portfolio Investor in India

Identify the 10 largest Foreign portfolio Investor in India

Prime Database recently carried out an exercise to identify the 10 largest FPIs in India.Through an examination of 1,447 listed Indian companies disclosure of the names of their foreign investors to stock exchange — and it turned out these FPIs together held Rs 1.79 lakh crore in Indian equities.

FPIs hold a major chunk of the non-promoter stake in Indian companies.

Europacific Growth Fund is the biggest FPI in terms of disclosed shareholding (above one per cent). Europacific Growth Fund belongs to the US-based Capital Research and Management Company. For Europacific, India is the biggest emerging market destination and fourth-largest overall — after Japan, the UK and France. As much as 87.5 per cent of its investments are outside the US.

The fund managers’ commentary in Europacific’s annual report released in March this year might explain why they allocated more money to India than China. It noted India and China shared similar growth trends, including the rise of the middle-class. However, India’s demographics were better than China’s. The median age in India was 27, noted the report, while United Nations data showed the median age in China was around a decade higher.

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Financial stocks are also high on the list of India’s second-largest FPI, the $38-billion Oppenheimer Developing Markets Fund. Led by Justin Leverenz, who has been overseeing the asset management since 2007, the fund invests 14.8 per cent of its total assets in India, second only to China, which received 19.4 per cent of its total investments as of June 2015.

HDFC Bank, ICICI Bank, and HDFC are among the popular investment names in these funds.

“Amongst sectors, the maximum exposure as on 30th June, 2015 was in Banks (Rs. 3.44 lakh crore) followed by IT Software (Rs.2.59 lakh crore). The sector which has seen the maximum increase in FII holdings in the last one year was also the Banking sector (from Rs.2.83 lakh crore to Rs.3.44 lakh crore),” .

Mumbai Metro Region Stuck with 2 Lakh Unsold Flats

New housing project launches down 47%, but commercial property turns around.

The housing market in the Mumbai Metropolitan Region (MMR) has recorded its worst half yearly performance since the global fi nancial crisis of 2008. The MMR — a 4,355 sq km area comprising municipal corporations of Greater Mumbai, Thane, Kalyan, Navi Mumbai and Ulhasnagar — had around 2 lakh unsold homes in the six months to June.

The last two-and-a-half years saw a continuous fall in launches and sales across Mumbai, the National Capital Region, Pune, Bengaluru, Chennai, Hyderabad, Kolkata and Ahmedabad. Mumbai, the most expensive property market in the country, saw a 47% drop in new housing project launches during the first half of the year.

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Over the last two years, demand in Mumbai fell 30%, while launches plummeted nearly 70%. The luxury residential market with a price tag of over .₹ 5 crore per apartment has also run into rough weather and not seen any new launches in the last six months.

The residential market in central Mumbai and central suburbs posted a good growth from a year ago. In MMR, builders have been venturing into locations beyond Thane for affordable housing projects. Around 59% of new launches with a price tag below .₹ 25 lakh are in Kalwa, Kalyan, Dombivali and Ambarnath. Locations like Mulund, Kan- jurmarg and Chembur have seen big launches, contributing 28% of new launches in these six months.

The report also added that commercial property has turned around, driven by office space pick-up by companies in IT/ITeS, banking and financial services sectors. “We expect Mumbai to clock office transactions of 7.7 million sq ft during 2015,” said Samantak Das, chief economist and national director, research at Knight Frank India.

“Residential market is still reeling under tremendous pressure, with a drastic drop in new launches at the back of falling demand. The recovery of the residential market does not seem imminent until 2015 and we expect sales to be in the range of 63,000 units, which is marginally below the 2014 levels.”