- 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)
Monday, March 10, 2008
Real Estate downcycle in the near term is inevitable
Most indicators reflect oversupply in near term and possibly medium term Our analysis indicates that
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