FIIs raise stake in real estate stocks

The booming real estate market has caught the fancy of foreign investors and they have raised their stake in a majority of realty firms listed on the bourses. However, some analysts believe these stocks are among the most expensive in the world.

An analysis of the holding pattern of foreign institutional investors (FIIs) in 22 major realty firms shows a majority of them raised stake in the April-June quarter compared with their stake in the previous three-month period.

FIIs increased their stake in 15 companies, including Unitech, Ansal Housing, DS Kulkarni and Indiabulls Real Estate. However, they decreased their holding in seven companies "" DLF, Atlanta, Era Construction, Lok Housing, Mahindra Gesco, Madhucon Projects and Unity Infrastructure.

The real estate sector in India has witnessed a boom in recent times led by an increase in purchasing power of people, relaxed lending norms by banks and housing finance companies and the growth in retail and IT sectors.

The buying of shares by FIIs in these companies comes at a time when a few analysts believe the country's realty stocks are among the costliest in the world.

Global investment services firm Standard & Poor's has said real estate stocks in India are the most expensive and give lower returns than most emerging and developed markets such as China, Singapore, Hong Kong and Australia.

A comparison of price to earnings (P/E) ratio of stocks from various countries showed that valuation of property stocks from the US and the UK moved lower, while those from emerging markets such as India continued to grow.

The P/E ratio is considered a valuation benchmark of a stock, where a higher ratio indicates an expensive stock, while a lower P/E ratio signifies a cheaper stock.

FIIs consolidated their stake by an average of 1-2 per cent, except Indiabulls Real Estate, in which their holding jumped 6 per cent to 44.96 per cent as on June 30 from 37.34 per cent at the end of the previous quarter.

FII holdings in Ansal Housing increased by more than 2 per cent to 17.53 per cent, while in IVRCL Infrastructure their stake jumped by 3 per cent to 61 per cent.

Other realty companies such as Unitech, Simplex Infrastructures, Nagarjuna Construction, MSK Projects and GMR Infrastructure witnessed a marginal rise in FII holdings.

FIIs generally sold shares of that company, which is around its all-time high, while they purchased shares around their low levels, an analyst said.

The current analysis confirms the trend as the seven companies, where FIIs decreased their stake, were trading at higher levels than their March quarter price, except Mahindra Gesco, whose price decreased in the June quarter.

The Bombay Stock Exchange benchmark index Sensex has risen by 1,578.41 points and FIIs poured in over Rs 200 crore during the April-June quarter this year, according to the data available on the Securities and Exchange Board of India (Sebi) website.