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Bangalore - Mumbai Residential Trends

Wednesday, July 10, 2013

Bangalore 2QCY13 saw new launches momentum continue at ~10,000 units for the third consecutive qtr. Historically, annual launches in B’lore averaged at ~26,000 units in last 3 yrs. However, if the current launches momentum continues, CY13 might witness ~40,000 unit launches. With rising unsold inventory, we believe this can become a concern going forward. Developers are launching new projects purely aiming at cash inflows when liquidity is poor. Timely execution is questionable outside organized developers and we advise caution.

Bangalore residential sales growth is flattening and current spurt is purely fueled by new launches by unorganized developers at reasonable prices and rising investor interest. Although affordability and expected softening of mortgage rates in CY13/14 are positives; execution delays and rise in number of investors are potential dampeners.

Residential prices in Mumbai are finally correcting! Prices in new launch projects across the city are lower than market averages by 10%. Discounts are deeper in areas where prices quote above Rs30mn per unit. Our calculations show that discounts via 20:80 schemes equate to ~10-12% cut in total acquisition cost. The
10 Yr CAGR growth in Mumbai resi prices was 14.7% in 2011 which has come down to 13.5% now as prices have either remained flattish or fallen across micromarkets. We foresee prices to remain under pressure for next 5-6 quarters till the 0 Yr CAGR comes to more acceptable levels of 11-12%.

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