The primary residential sales dropped in Bangalore in CY2014. Slowing sales have resulted in a 30% drop in launches too in CY2014. As the pace of sales growth didn’t match the pace of launches in Bangalore, pricing power always remained with the buyer. This also resulted in building up of inventory (unsold under-construction area) in Bangalore. What surprised us, not matching our expectation of only super-luxury sales slowing down, is that units selling below Rs 5 mn each also slowed down while those selling above Rs 7 mn each showed volume growth.
Prestige's sales strategy and sales stand out as it entered various markets within Bangalore and launched projects starting below Rs 7 mn/unit, attractively pricing its projects, which have resulted in growth. While Sobha’s strategy of launching only luxury and super-luxury projects resulted in their sales volumes remaining flat (although an increase in value terms), Puravankara has managed to maintain marginal growth on volumes from its new launches. But unlike Prestige and Sobha, Puravankara has sizeable unsold ready units to be sold.
Sobha has soft-launched its ‘Aspirational Homes’ product in 4QFY15, with unit prices starting as low as Rs 3.5 mn/unit. We believe this project will see good response and Sobha needs to replicate such projects at multiple locations for growth from current levels. Prestige, too, acquired 15 projects in 3QFY15. Entry into new markets, we believe, will be the key to Prestige’s volume growth in its residential business.
CY2014 saw some large lease deals in Bangalore. Outer Ring Road (ORR) remains the most attractive location with the largest developments and the largest leases being discussed in the market. In the past five years, absorption contribution in Bangalore has increased from around 40% to around 65%, followed by Whitefield. All major office developers, Embassy Developers, RMZ, Prestige Estates, Salarpuria Group among others, are present in the market. Whitefield is the next desired location among occupiers.
No comments:
Post a Comment