Good morning, the entire real estate world's attention has been frozen by the slow moving ship wreck that is Evergrande, a Chinese real estate biggie that is up to its penthouse in debt.
However, iron clad realty stocks back home aren't the least bit bothered and startup founders are looking for funds more than ever before. Today's blurbs are thus, mostly cheerful.
Enjoy your morning, have a great day and an even greater weekend.
Lock Stock And Barrel
Indian realty stocks have finally arrived in armour plated vehicles. Even as major stock markets globally are feeling the ripples of Evergrande's financial downfall, the Nifty Realty Index has jumped 22% through the last three trading sessions.
Zoom In Please
This year, Indian realty stocks have displayed stellar performance with the Nifty Realty index gaining 57% so far, against a much lower 27% gain in the benchmark index, Nifty50.
While all kinds of stock tips do the rounds, experience will tell you that ultimately, for a sector's stocks to perform well, the sector itself has to be on a growth path.
The realty pack thus, is mirroring to a large extent, what's happening on the ground.
Tailwinds After Ages
The realty index's recent bull run can be owed to the resurgence in demand due to low interest rates and supportive government policies. Proptech and the scale it brings to the sector is also one of the reasons propping up the bullish movements.
To top it all, consolidation in the developer space over the last few years has weeded out a lot of risk.
Proof Is In The Numbers
Per a recent report by brokerage Motilal Oswal Financial Services, more than 6,000 units have been registered in the first 21 days of September, surpassing the September 2018 total of 5,913 units.
"While registrations will begin to drop with the advent of 'Shraad,' even if 50-100 units are registered every day, overall registrations will be nearly 7,000 units which will be a record in the last decade," Motilal Oswal quoted to the press.
Zooming Out
Devarsh Vakil, Deputy Head of Retail Research, HDFC Securities points out other factors powering sector growth.
Taking cues from the Maharashtra government's successful implementation of the reduction in stamp duty, Karnataka has reduced stamp duty to 3 percent from 5 percent. Such moves by state governments will encourage middle-class buyers to probably make that pending home purchase.
“Income growth overtook the average rise in the price of properties in the last few years and that is helping the residential real estate market to revive across the country. Affordable housing has consistently been on the central government’s agenda ever since the policy on Housing for All by 2022”, Vakil said to Moneycontrol.
Other experts collectively feel that since the sector has given it everything to recover from almost six years of poor performance, this sweet spot is likely to continue. 🤞
Villages Get Cool Tech
Earlier, when technology was expensive and cumbersome, there was a big time lag between its urban and rural adoption. But with reducing hardware and software costs, and access to cheap high speed internet across the country, that old trend is now passé.
That Sounds Good
Yes. Property tax collection in Andhra Pradesh villages are going online. And we are not talking about a pilot or a stage wise adoption. The state plans to scrap the manual system of tax collection altogether as soon as the system goes online.
How Does It Work?
First up, all the data of 86 lakh property-tax-paying households in panchayat areas were synchronized with the app.
Second, with the due dates and amount of taxes online and ready, the bill collector will simply have to enter the One-Time-Password (OTP) sent to the mobile number of the tax payer on his app. This process will take place when the taxman visits the tax payer in person.
Third, the tax payer will get a digital receipt of the payment immediately after the amount is collected by the attending bill collector. All done.
Sounds Like A Win-Win
It is. For the tax payer, it brings transparency, convenience and peace of mind. For the government, it ensures lossless collection of property tax and efficient planning of income vs. expenditures.
Talking of expenses, panchayat minister Peddireddy quoted to the press, “While the finance commission grants will help the villages take up new developmental works, the property tax collections will make them self-sustain, at least to manage drinking water schemes, electricity and sanitation. Tax collection is very crucial to bring villages into clean mode.”
What Lies Ahead?
The state government could ask panchayat boards to go for a data based assessment of taxes, to bring more households into the tax net, as well as revise property taxes in line with the growing market value of properties.
Who's Got Your Money?
It all starts with a great idea. Over time, some people with ideas act on their vision to create something that benefits a certain section of people.
As more time goes and more folks get benefited, the startup grows, and once in a while, it turns into the Amazons and Ubers of the world.
However, scaling up a good idea requires truck loads of money. Thankfully, there are individuals, firms and giant corporations that are into the business of funding startups. But how does that world work?
Here's a quick guide to startup funding.
Seed Stage Funding - This is when a startup idea is at infancy. Of course there has to be a proof of concept/ working prototype, depending on the nature of the business. However, at this stage, there are no real revenues from the model yet, though the money making potential is legit.
Seed stage investments are based entirely on the founders' capabilities. Investors don't really care about the idea so much. Instead, they will fund a startup only if they are sure that the founders have the drive to create something valuable.
📝 Most investors will interact directly with founders at seed stage and hiring a funding advisor is irrelevant. This is more of a friends and family round.
Pre-Series A Funding - Once the seed money has been fruitfully utilised to build a Minimum Viable Plan (MVP), and revenues are expected in the near future, a pre series funding becomes likely. At this stage, investors will go through the relatively simple cost and revenue projections, operation methods, expansion plan and future potential.
📝 Again, at this stage most investors will like to speak directly with the founders, deliberate on the business plan to assess the potential to fund the startup. External advisory is still not very effective.
Series A and B Funding - When the startup has established a sizeable regular revenue (say $100K a month), it could now look to raise $2 million and above. For this stage, a good funding advisor is critical, as they are specialists who add value with pitch decks, revenue projections, KPIs and the happily-ever-after storytelling.
📝 Series A/B fundraising takes between 2 to 6 months to complete, and with founders busy managing the growing business, a funding advisor can use her expertise to raise the money for a success fee. (Success fee ranges between 3% to 5% of funds raised).
Series C and Beyond - These rounds generally go above $10 million and are strictly banker and lawyer territory, even if the founder understands financing. There is simply too much to be done and all tasks require deep expertise.
How Should You Begin?
If you're just starting out with an idea, bootstrapping (using existing resources at your disposal) is the best option to keep your startup on course.
Bootstrapping helps founders stay sharp, committed and true to their cause, due to the sheer amount of heat and pressure it puts on them. Only heat and pressure make diamonds, FYI.
- Karnataka Chief Minister Basavaraj Bommai on Wednesday asked officials to complete the second phase of Bengaluru Metro work by 2024, a year before the deadline. Patna and Kolkata Metro authorities 👀
- Dubai's DAMAC Properties has received the approval to take the company private. It had earlier announced plans with an offer to take the company private, then withdrew them as regulators in Dubai examined the plan.
- Chennai-based real estate developer Casagrand has announced plans to go public, with a probable IPO in December 2022. Since 2004, the company has built many residential projects in Chennai, Bengaluru and Hyderabad.
- Chinese authorities have asked local governments to prepare for the potential downfall of the debt-ridden China Evergrande Group, the Wall Street Journal reported, citing officials familiar with the situation.
US stocks felt the ripples of China's Evergrande balking under its own weight. This is probably a life lesson for everyone investing in companies/countries run by dictators-for-life.
It's time to close this week on that cautionary note. Stay safe.
We will be back on Monday morning like we never left. 💙
☕ The Crew@Ginger Chai