There's been a lot of talk about our story today on the Real Estate bailout. So we want to set the record straight. The bailout isn't something that happened on the fly. Many people saw this coming a long while back. So here's a thread on the real folks that got this one spot on.
Back in July 2015, Ambit Capital published an extensive report on the unravelling of the Real Estate Industry. They wrote- "Prices had already moderated given that lending to residential real estate was drying up and developers were scurrying to sell off their unsold inventory"
Unfortunately for Ambit, as banks stopped lending to the industry. NBFCs took over. The problems plaguing the industry never went away. Instead, they simply resorted to more borrowing to survive on life support. Ambit got castigated for getting this wrong.
But they weren't wrong. In fact, their prognosis was spot on. If it weren't for the NBFCs the unravelling would have been inevitable. But who cares about that yeah? The world runs on fortune-telling, not research. naredco.in/notification/p…
Then Ambit Capital released another report on Feb 2018. This time the focus was on the NBFC sector, more specifically about risky developer financing. The conclusion was that with regulations, demonetisation and GST hurting the Real Estate industry, NBFCs were in a tight spot
However, what they did not foresee was the IL&FS crisis. And as soon as this event triggered a wave of defaults, NBFCs cut funding to the Real Estate Industry and the sector, in turn, had nowhere else to go triggering another wave of defaults.
The end game was now near. Real Estate Sector Lending was on deathbed and NBFCs were most exposed. Again since Ambit got the timing wrong, very few people paid attention. propstack.com/news/wp-conten…
Finally The Liases Foras White Paper. This was one of the few reports that quantified the magnitude of the problem. In fact it was so on point that the title was this- " Developers need to scale sales by 2.5x to stay afloat"
And since that wasn't going to happen there was going to be pain. Again people found loopholes in the report. Because their analysis did not make a distinction between residential and commercial Real Estate, there was backlash. But they were right. The sector did need a lifeline.
Here is a quote from the report. Bear in mind this was from February 2019- "It feels that the situation of developers is akin to an elephant in a well which is unable to come out on its own. Somebody needs to replenish the well." liasesforas.com/admin/WhitePap…
And guess what happened yesterday. The well was replenished. So the next time you see predictions go awry, see if there's actual research backing the call. Because unlike buy/sell calls, there's actually something to learn from data-driven analysis.
