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Dalal Street

Bangalore Steady Sales + Gurgaon Lowest Unsold Inventory

Tuesday, July 10, 2012

In Gurgaon Micro Market, Quarterly demand (sales) has been ahead or in-line with supply (new launches) since the last 12 quarters with the exception of Q1CY2011. This clearly indicates robust demand for residential units in the market. We foresee this trend to continue led by large and rising migrant population aspiring to live and work in Gurgaon. In terms of affordability, Gurgaon continues to remain at the cusp of affordability (defined as monthly mortgage installment / monthly income) which has supported resilience in demand.

Absorption rate was flat in 2Q led by slowdown in new launches (supply). Unsold inventory tapered further in 2Q as demand surpassed supply yet again in Gurgaon. The unsold inventory (represented in # of quarters required to exhaust unsold inventory) has been less than 4 quarters since 1QCY10, which is the lowest compared to other cities across the country.

Sales volume in Bangalore remained steady despite significant reduction in new launches. We believe the same is due to affordable prices which have historically seen annual increments in single digits over last 8-10 years. This particular nature of Bangalore has attracted more end-users and long-term investors over speculative investors as upside from housing projects has remained limited.

Unsold inventory in Bangalore city reduced primarily led by steady sales volume and 30% dip in new project launches. We believe Bangalore developers recognize rise in unsold inventory and some plan to launch new projects once the unsold inventory figure attains more comfortable levels.


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