It seems hard to find a bright spot in any of the world’s top property markets right now. . .
High-end real estate buyers who fueled a commercial and residential property boom are holding still, or selling out.
And equity traders may be waking up to the smell of shoddy consumer confidence readings in the U.S., which indicate a consumer-led recovery being another quarter or two down the road.
So with India’s benchmark index having dropped more than 4% on Monday, led down by the country’s top real estate developer, why am I bullish on that particular sector?
Because my top play on future property sales in that top emerging market isn’t a real estate play at all. . .
How to Play India’s Green Building Boom
The billionaire Singh family runs DLF Building India, which develops everything from low-income housing to ritzy luxury shopping malls.
On August 17, the Singhs must have sung a sad tune, as DLF led Indian shares down with a 7.8% downturn.
From the end of March through late June, revenue sagged by 57%. Net profit came in even worse for the first quarter, plummeting by 79%.
Domestic shares on the Bombay Stock Exchange are being run through the ringer, and even UK-based private investors who had been licking their chops at a chance to profit from Indian property funds are now scuttling plans. England’s Knight Frank Group is putting a $250 million India-oriented fund on hold, given global property market weakness.
Yet, the Indian government points out the long-term domestic trend actually favors one group of investments over all others.
I’m talking about cleantech stocks like First Solar (NASDAQ:FSLR), which is becoming a major player in India’s secular green building bull market.
From 20,000 square feet of energy-efficient building space in 2003, India now boasts 30 million feet of environmentally-friendly developments.
By 2014, the head of India’s Bureau of Energy Efficiency says that figure will more than triple, to over 100 million square feet of energy-optimized real estate!
First Solar, the international leader in low-cost thin film photovoltaic (PV) cells, is ready to pounce on those plans and get its products into every new Indian building it can.
FSLR is in the middle of a momentum shift that may change the source of its sales from Europe and the United States to India, China, and Australia.
Investing in Need. . . Not Fancy
First Solar is based in the sunny Arizona desert, but its reach is worldwide. The bulk of its European sales come from Germany, which heavily subsidizes solar PV installations, and FSLR just announced that it will build France’s largest solar panel plant.
In India, though, First Solar knows it has the potential to get in on the green building boom from the ground-up, and the company can take advantage of opportunities that developed markets simply cannot offer.
We’re talking about first-time home buyers and government-sponsored mixed-use housing that blends commercial and residential units.
The fact is that high-end consumer confidence is down around the world. India’s wealthiest citizens may regret their decision to buy glamorous homes during the global stock market rally, for they missed a chance to keep energy bills down and hang on to more money for things like Louis Vuitton bags and Rolex watches.
And far from most investors’ radar, millions of homeless and millions more middle-class Indians aren’t looking for upgraded digs — they simply want a first home.
India’s population is expected to surpass China’s by 2030, and investors who stay ahead of this growth story will make a mint while saving themselves from the Johnny-come-lately market rush that is sure to come.
We’re talking about primary demand, and in Green Chip International, we’re investing in the phenomenon of new Indian home buyers going green.
The international property market dog days won’t last forever, and neither will First Solar’s current price weakness.
FSLR currently trades at around $135 per share. That’s rich, I know, but consider that it’s gone as high as $202 in 2009 and got bid up to $282 before last year’s market crisis.
On gloomy days when the news looks all bad for traditional sectors like real estate, clean energy contrarians like me and fellow GCI editor Nick Hodge find the profitable bright spots that point to winning plays on long-term trends.
Take a look at this free GCI special report and see more of what I mean.