Indian Real Estate: A Dlf Road To Success
By Property

The last couple of years have seen the investments of property and real estate investors go up, up and away, with real estate appreciating 10-times over in the past 3-years, in Bangalore alone. And, certain areas of Gurgaon and Noida have also seen a similar appreciation, with on an average, land prices in many Indian cities having tripled in value over the same period.

A significant appreciation at the beginning of the year, and it was felt from this point onward, real estate prices would at best stagnate or at worst, begin a slow climb down. But, that has not happened due to the DLF effect, DLF which is making India a property-driven stock market, and is coming out with the mother of all IPOs (Rs. 10,000-crore) in June 2006.

A CLSA report confirms that post this IPO, India will become a property driven stock market very much like Hong Kong & Singapore in the Nineties. And, post the IPO, projections are DLF will have a market cap of over Rs. 1,00,000-crore, making owner K.P. Singh (owning 88% of the company post IPO) the richest Indian based out of India, pipping Azim Premji and Ambani Brothers to the post. Even in 2004, given the value of the land bank owned by DLF, KP Singh was touted to be amongst the richest Indians. Since then, real estate valuations have gone up dramatically, and to understand what DLF is all about, a trip to Gurgaon is necessary.

Starting out by colonizing and developing a number of Delhi colonies e.g. Model Town, Greater Kailash – I / II, 60-year old DLF was left without any business when Indira Gandhi made Delhi Development Authority (DDA) the sole agency responsible for developing property and real estate in Delhi in 1970. Without business, but with significant cash assets in the late 1970s, DLF scouted around, only to home in on the sleepy little village of Gurgaon. Chosen for the Maruti project, Gurgaon made good business sense.

The next 10-years saw DLF buying over 10,000-acres of land in and around Gurgaon. Phase I of DLF’s first township was developed in the late eighties and DLF began to sell plots here. Seeing the potential, soon Ansals and Unitech followed DLF to Gurgaon. The rest is history!

Today, the Gurgaon skyline is dotted with shining glass edifices that sing paeans of praise to progress made by DLF. And, DLF City comprising of five phases is spread over 5000-acres, while the group has many other plans up its sleeve. All this was happening when not many had heard of DLF. Focusing

on becoming a Pan India player, the last 2 years has seen DLF buying big properties in Mumbai, Bangalore, Chennai, Pune and Jaipur.

For those who thought the Indian real estate sector was heading for a bubble in 2006 had better re-think the property scene again. The fact is share prices of real estate developers has gone up 100%. Take for example:

1. UNITECH– In the past 3-years (May 2003 to April 2006) Unitech share prices have gone up from Rs. 40.60 to Rs. 6068 per share.

2. ANANT RAJ INDUSTRIES:- In the last 1-year (May 2005 to Apr 2006) Anant Raj Industries share price has gone up from Rs. 15.60 to Rs. 816.2.

3. ASHIANA HOUSING & FINANCE LTD.: In the last 40-days (20th March 2006 to 30th April 2006) Ashiana Housing share price has gone up from Rs. 97.1 to Rs. 352.2.

For stocks to appreciate over 100-times in one’s lifetime is a very rare phenomenon, and so many in real estate could only mean, there has been a shift in the way people view real estate in India or else there is a bubble building up. A few incidents do indicate there could be a minor bubble, as a pre launch offer of a Jaipur property was for Rs. 2-lakh, on the promise in a month’s time, the same could be sold for Rs. 3-lakh to another investor, a 50% return within a month. Then again, recently a small block of land in a Gurgaon village sold for over Rs. 3-crore.

When the CLSA report starts valuing Infosys based on the value of its land bank, one has to start questioning what is happening. It means no longer does one have to work hard to become rich; one simply has to buy real estate, and wait to sell it for a higher price. The rate at which real estate prices are spiraling higher and higher, making real estate owners richer and richer, within a decade Indians will be as prosperous as the Americans.

But, to be honest, one feels a correction in real estate stocks is needed in the long term, meanwhile, short-term wise, anything can happen, and the sky’s the limit for real estate! Always, a good buy, if you have the money or the bank will loan you some, buy a house or two, throw in a commercial property, and you will be clinking glasses with the likes of Azimji Premji and the Ambanis! Remember to toast the value of real estate when you are rubbing shoulders with the moneybags of India! You owe your billions to Indian real estate!

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