Land fever – Bombay It is called the DLF Cup. GREED & fear refers to two days of one-day cricket matches between India and Pakistan held in Abu Dhabi this week. The interesting point is the name of the sponsor. For DLF is the name of the Delhi-based property developer whose pending IPO will mark confirmation that India is in the midst of a nationwide property boom. The market talk is that DLF, which built Gurgaon, will be valued at between US$25-30bn. This would leave its controlling shareholder KP Singh, who plans to sell only 10% of the company, as one of the world’s richest men. Yet it is apparently the case that six months ago many people in the Bombay-centric Indian stock market did not even know what DLF was, due to the localised nature of the Indian property business.It has been a theme of GREED & fear for sometime that India is a classic asset-inflation story where the present bull market is likely to culminate in extreme overvaluation with stocks rerated on their land holdings.
This view is maintained. Still, returning to the country this week after five months, it is clear that there is now general recognition of the national property boom that is under way. This was not the case last year. In central Bombay, prices have gone seemingly silly. The most recent example is a 3,475sf apartment in Nariman Point in Bombay, which was sold at Rs63,000/sf (equivalent to US$1,400/sf or US$15,070/sq m), according to today’s edition of The Times of India. The boom, as is only to be expected, is now spreading to outlying areas. Steep price rises have already been seen in cities like Bangalore, Chennai and Poona, as well as of course Delhi and Gurgaon. And catch-up trades will now occur in places like Calcutta (see GREED & fear Black hole revisited, 17 November 2005) and Jaipur where the word is that the IT companies are due to set up new facilities just as they have already done in the West Bengal capital. But the key point is that it is a nationwide boom that is under way based on the availability of reasonably cheap credit, rising incomes and, most importantly, a dramatic increase in consumer confidence.
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