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Realty Check

The real estate sector is suffering in the current markets & its effect is seen on funds as well

London Bridge is falling down, falling down… the poem we learned and sang so eagerly in school is now synonymous with the current fate of the Indian real estate sector. An unprecedented boom is what the sector had witnessed in the past couple of years, but it all seems to be falling down now. The sector is facing the brunt from not only the rising inflation, but from the banks raising the lending rates in what can be termed as a double whammy for the sector.

The demand for property and housing has been severely affected and its effect has cascaded onto the realty index as well as the mutual funds. Since January, 2008, the realty index has fallen by as much as 46 per cent.

In May, 2008, 52 funds had the real estate sector. Amongst these funds, DBS Chola Growth, Sahara Infrastructure Fixed Pricing, JM HI FI, DBS Chola Opportunities, DBS Chola Hedged Equity, Taurus Discovery Stock, Reliance Regular Savings Equity and Reliance NRI Equity maintained exposure of above 5 per cent

DBS Chola Growth which was maintaining 9.38 per cent exposure posted negative returns of 22.48 per cent in comparison to the Equity Diversified category, which was down by 16.98 per cent. Next in the group was JM HI FI, with 7.67 per cent exposure to the realty sector, was down by (-) 25.42 per cent. (See the table below)

In the realty index, DLF, Unitech, and Indiabulls Real Estate weigh for 76 per cent of total capitalization. The market presented a sorry picture for DLF, which came down to Rs. 600 from Rs 1200 as on May 2008, Unitech, which was trading around the Rs 500 level in January was available around the Rs 240 level and Indiabulls Real Estate came down to Rs 450 from the Rs. 800 level.

The BSE Realty Index, launched on 10th July 2007, began in the 7000 level, grew by 86 per cent and touched its all time high of 13647 in January 2008. Presently, the index is down by 66 per cent and is expected to still lose more steam before its first birthday bash.

Scheme  Real Estate (%)  Return (1 Month)  Return (2 Month)
DBS Chola Growth 9.38 -22.48 -28.23
Sahara Infrastructure Fixed Pricing  8.47 -17.76 -24.91
JM HI FI 7.67 -25.42 -33.38
DBS Chola Opportunities 7.43 -22.80 -27.82
DBS Chola Hedged Equity 6.83 -22.92 -28.78
Taurus Discovery Stock 6.74 -21.63 -29.54
Reliance Regular Savings Equity 5.46 -16.96 -22.33
Reliance NRI Equity 5.45 -21.90 -26.42
Returns as on 30th June 2008
Net Assets as on 31st May 2008