Realty Stocks Crash 70% from Highs

Further tracking from the paanwala top in Mumbai's realty markets, and subsequently highlighting the 30% correction in Mumbai's realty market, most investors in real estate are refusing to read the writing on the wall.

We may have done a full 10-year cycle in real estate bull tops from 1998 and 2008, and now the next 5 years should see a retracement of these prices by at least 30 to 50%.

Is there a correlation between real estate prices and real estate stocks? No one is sure, but even if there exists a vaguely direct connection, then with most real estate stocks crashing 50 to 70% from their 52-week highs (see box), it points to the fact that markets have discounted a slump in real estate business, and consequently real estate prices in India are slated for a steady decline.

Even if these drops be attributed to panic in the overall markets, either realty stocks show some quick bounce to old heights or we are on the threshold of some serious slide, as these companies become desperate to show profits by issuing a fire sale of apartments, or that those ubiquitous real estate speculators start running to cover their capital.