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Dalal Street

Gurgaon: Oct-Dec sales dipped to 2009 levels

Saturday, April 05, 2014

The Gurgaon market continues to show stiffness on the demand side despite launches by top developers during the festive season in the Oct-Dec quarter. We attribute this weak poor trend in demand to 1) poor affordability; 2) high investor unsold inventory exerting pressure on primary markets; 3) slowdown in migration causing significant drop in commercial leasing, thereby denting end-user demand; and 4) notable shift in end-user interest from a primary market to secondary market (de-risk strategy given tough macro-economic conditions).

Although we continue to believe Gurgaon is a robust market, current market dynamics confirm the key risks are playing out. We have been highlighting two risks for Gurgaon market – 1) rising prices amid slowing income growth and 2) stock dump by investors in projects nearing completion (launched in 2009-10).
Absorption rate fell further to 11.5% in 4QCY13. We worry that the absorption rate might touch singledigits if ongoing trends sustain. If absorption does not improve soon, we foresee a notable drop in new launches and price cuts in primary markets to resurrect sales and cash flows.


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