If an investor had invested Rs. 1 lakh in major real estate companies listed at the Bombay Stock Exchange (BSE) in January 2010 when the going was good and there were still no apparent signs of distress, his investment would be reduced to Rs. 49,000 as the markets closed on Monday.
Realty firms on an average lost as much as 51% of their stock price in 2011, with some companies losing as high as 80% of its share value. And it is not just the stock prices of the real estate companies that have suffered but also net profits.
According to a data compiled by Hindustan Times, top 14 listed real estate companies had a rather healthy top line of Rs. 44,480 crore in calendar year 2010, while in 2011 the top line was Rs. 18,524 crore, down 58%.
The cash flows were also impacted as buyers preferred to stay away from buying property. In Mumbai alone, the sales were down by around 25-30% in 2011 when compared to 2010. This was reflected in a decline of projects launches by about 52% in 2011 as against 2010, according to Knight Frank research data.
“The year 2011 was dull on account of slack transaction activity, few project launches and stagnant property prices,” said Pranab Datta, managing director, Knight Frank India.
While in 2012, the beginning was not very encouraging for investors; industry experts say that the performance of the realty stock depends mainly on how the companies are able to attract the buyers back.