The three Tier I cities in India, namely Mumbai, Delhi-NCR, and Bangalore, together represent about 70% of the real estate market (calculated across the top seven metro cities). About 70% of annual new residential unit launches and sales in the past 4-5 years have been in these three cities. Similar is the case with the retail sector, where the three cities represent about 71% of total retail mall stock and annual transactions.
Residential prices in the three key cities have largely remained flattish to single digit correction in FY14whereasthey increased by up to 30-50% since the previous cycle in 2009. We expect prices in Mumbai to correct by up to 5-10% in the next 2-3 quarters followed by time correction over the next year. Whereas Gurgaon primary market is expected to correct up to 5% in the same time frame. On the other hand, we expect prices in Bangalore and Noida to stay firm given their increase was limited to inflation+ levels. Price correction will primarily be driven by the need to trigger sales volume recovery, generate cash flows and curb rising unsold inventory.
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