Sebi initially tried to bring sanity to the valuations by insisting that valuers would be liable to investors for untrue statements but this apparently did not make a difference. Sebi’s secondary market advisory committee on disclosures then proposed a series of improvements in disclosure norms that have since been cleared by the board at its recent meeting.

At the end of February 2007, seven companies had filed draft prospectuses with Sebi to raise approximately Rs 17,400 crore from the capital market. These include DLF Ltd, which plans to raise Rs 12,000 under a new prospectus and Housing Development and Infrastructure Ltd (often confused with the blue chip HDFC), plans to raise Rs 2,000 crore. Two companies, Omaxe and Purvankara Projects, plan to raise Rs 1,200 crore each while Orbit Corporation which got a low rating (one out of five) made an offer to raise Rs 150 crore. Others in this pipeline include Kaushalya Infrastructure and IVR Prime Urban Developers (which plans to raise Rs 830 crore). Of all the companies mentioned in this column so far, only four have disclosed the extent of land that is actually owned by the company or its subsidiaries.

This was the sorry state of affairs when Sebi tightened the screws on valuers and tightened disclosures and made IPO grading mandatory. The impact of Friday’s fresh liquidity squeeze has still to be factored in to check the fate of realty prices and the fund raising plans of developers in the coming months. However, if foreigners are willing to fund construction, the construction boom may continue with a reality check on pricing.