Realty ads ride IPO boom

A serious change is visible in the ad spend of real estate developers, who now form the second largest group of advertisers in the country after educational institutions. Till recently, much of their money was spent on promoting new projects. Now, they are pumping in larger sums of money into advertisements for their pubic issues.

According to a recent report by AdEx Media, a division of TAM Media Research, January to June 2007 (H1 '07) recorded a growth of 1.6 times in public issue advertisements by real estate developers over H1 '06. At the same time, the overall money spent on advertisements by these developers is more or less at the same level as last year.

According to Sam Balsara, chairman and managing director of a media buying agency, Madison Media, the spends by real estate majors during April to June 2007 were close to Rs 260 crore. This works out to an annualised spend of a little less than Rs 800 crore, which is close to the Rs 798 crore spent in the previous year. According to the AdEx report, H1 '07 also saw approximately 260 ads per day on an average by real estate firms in newspapers. This was approximately the same number of ads per day by real estate firms in newspapers in H1 '06. Clearly, advertising budgets are now targeted at successful completion of pubic issues, rather than promoting new projects.

The reason for the spurt in public issue advertising is not far to seek. Investment bank JP Morgan has said that initial public offerings (IPOs) in the Indian real estate sector could double every year.

JP Morgan's estimates suggest that the public floats in the real estate sector could raise $2.5-3 billion in the coming months. According to JP Morgan, it is not unusual these days to see a single-ticket investment of $250-300 million in realty projects. Two years ago, it was only $50 -$100 million.

In the recent past, the country's leading developers like DLF, Parsvnath, Sobha Developers and Omaxe have raised large chunks of money from the primary market.

During H1 '07, the AdEx study found, HDIL was the biggest advertiser, followed by Parsvanath Developers, DLF, Omaxe Ltd, Vian Infrastructure, Ansal Properties and Infrastructure, A P Housing Board, Royal Palm Estates, Baderwals Infraprojects and the Prestige Group.

Executives in advertising agencies say that the last few months have also seen a definite rise in ad spend by regional developers. As a result, these local players are expected to account for almost 45 per cent of the ad spend by the sector during the year "" up from 31 per cent last year and 16 per cent the year before. Real estate developers, it is worth noting, are now the country's second large advertisers after educational institutions.