Real Estate downcycle in the near term is inevitable

Most indicators reflect oversupply in near term and possibly medium term Our analysis indicates that

• Momentum for hoarding land is unwarranted,given the execution run-rate of developers and the significant geographical expansion of metros.
• We estimate that demand from IT/ ITES (~80% of demand for office space and ~40% of residential space) over the next 5-6 years will significantly lag the cumulative supply proposed by developers
• Number of Income Tax assesses is still small, suggesting that the emergence of the Indian middle classmight not be as strong as it was projected
  
• A sharp rise in property prices has cooled demand, as shown by a decline in property registrations in a few major cities anda sharp drop in the shift from bank outstandings to mortgages. [Sobha Developers said, they don't see a fall in demand, then explain to me the fall in property registrations in Bangalore :-)]
  
• Without an expectation of interest rates declining and the hazy outlook for IT/ITES sectors, we believe demand will remain weak in the near term
• With supply continuing to ramp up, oversupply in select markets could spread. Developers with an eye on the market cap are hesitant to slash prices or supply. Thus, a downturn seems inevitable in the near term in residential (~70% of the Indian real estate sector)

Your comments and thoughts are most welcome.