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Residential Sales Bottom Out India

Wednesday, November 26, 2014

Gurgaon broke the eight-quarter declining trend on sales while Bangalore and Mumbai maintained their steady run-rate. Launches slowed down further in 1HFY15, owing to high inventory in most markets. With
launches slowing down and sales marginally showing some pick-up, inventory months (months to sell unsold area in under-construction projects based on the current pace of sales) have now stabilized across the key markets in India. 2QFY15 was the first quarter since 3QFY10 in which sales in the top seven metros were more than launches, mainly on contribution from MMR (Mumbai Metropolitan Region) and a strong Pune market.

The National Capital Region (NCR) continues its weak performance, as all markets in the region remain weak. Among the major markets within NCR, Gurgaon ducked the trend with more sales then launches in 2QFY15. We believe that in Mumbai and Gurgaon, volumes will increase with price rationalizations. We see Gurgaon volumes picking up gradually over the next four quarters, as we expect developers to launch projects at rationalized prices (some signs in 1HFY15). Similarly, prices will stabilize in most markets of Mumbai due to high supply. Bangalore and Pune continue to sell well (below `6 mn/unit ticket size) and remain the largest markets in India.

Bangalore recorded lower launches for the fifth quarter now (delays on changes in some committees as well as large launches in the past) and Mumbai (fewer launches before elections) during 1HFY15. Gurgaon continued its low run-rate of launches due to the high near-completion and under-construction unsold areas. Mumbai continued its steady but low-volume run-rate of sales while mid-income sales in Bangalore and Pune remained strong.

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