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Indian Realty Cos Become Prey of Falling Stock Market

Submitted by on Thursday, 25 September 2008No Comment

Hit by rising interest rates, it is no more a ‘bull market’ for Indian real estate stocks. Shocked and suffered by the same, eight real estate firms have put on hold their plans of listing on the Alternative Investment Market (AIM) of the London Stock Exchange.

These companies now find themselves unable to raise the expected funds. “Although we have filed the papers but we don’t find it an ideal time to list”, says a Mumbai based property developer Lok Housing and Companies, who are among the real estate companies who have deferred the AIM listing. Following in footsteps are the prominent players such as Ansal Properties & Infrastructure Ltd and the Embassy Group of Bangalore.

Embassy Group has refused to comment on their future moves whereas Ansals seem to have lost interest in AIM listing at this stage after seeing the slowdown of real estate stocks.

With properties in smaller cities and towns have stopped appreciating and are undergoing a price correction, the real estate boom is completely dependent on the metros. Three leading Indian real estate firms have shed between 8% and 36% in market value since January.

Lesser stringent rules and regulations make the Aim more lucrative than other stock exchanges. Wooed by the same, as many as 12 Indian companies raised over over $2.7 billion from AIM. Of this, $2.2 billion was raised by real estate developers including Unitech Corporate Parks, Hirco Plc., Ishaan Real Estate Plc., Evolvence India Fund and Kubera Cross Border Fund.

Most previously listed real estate stocks are trading below their offer price, a fact which has scared the most investors.

The stock market has brought some major modifications in its laws regarding listing to include a revaluation of land banks based on present value. Also, the companies would be asked for details before listing, says the regulators. The shift is taken to bar the entry of fake operators in the market.

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