Housing Finance Scam - Realty Stocks in Blood Bath

The Indian Real Estate Stocks which have always been a pack of cards falling at the slightest jerks have taken a severe beating on the Stock Exchanges today. RBI which has been an indirect hand in glove to the real estate industry backed by Government sponsoring Black Money / Unaccounted - Non taxed Money to be used in deals makes this the least preferred choice for investment.

Investors deserted REal Estate Stocks in yesterday's trade and continued their selling spree in early trade today. Almost all the stocks are down between 5% to 10% and here is how the Indian Real Estate Stock Index looks like.

LIC + PSU Banks Financing Realtors Scam

The CBI has arrested officials of several financial institutions ranging from CEO to deputy general managers for allegedly accepting bribes from a debt syndicate company, "Money Matters", for facilitating loans to companies across many industries including Indian property developers.

Details of those arrested: Personnel from LIC Housing Finance (CEO), LIC (Secretary, Investments), BOI (GM), Central Bank (Independent Director), PNB (DGM) and 3 people from Money Matters (CMD + 2 others) were arrested.

Pro-forma analysis of commercial real estate books indicates that were half these books to be written off (an extreme outcome, in our view), the impact on NAV would be an average of 16% for our PSU bank universe but 72% for LICHF. On the other hand, were earnings/book values to remain unaffected but multiples reverted to their 5-year averages, our scenario analysis indicates anything up to a 20% impact on the share prices of our PSU bank universe from current levels.

We believe these investigations will have negative implications on the companies involved and will remain an overhang, both from financial impact as well as sentiment perspective.

Has the RBI Woken up yet to take to task all the il-legal money launderers ? Land / Real Estate is the Worst Asset Class for Investment. Read on How Government Sponsors Black Money in Land Dealings.

Historical Returns in Indian Property

JP Morgan was able to capture four transactions in four major markets that gives pointers to a long term price growth trend.

Mumbai (Napeansea Road) over a period of 90 years returned 15% ;
Prime Delhi (Kasturba Gandhi Marg, Barakhamba Road) over 40 years has returned 17%
Gurgaon over a period of last 20 years returned 20%
Chennai (T Nagar) over a period of 80 years returned a CAGR growth of 20% ;
[All Returns in CAGR]

Ansal's residential projects in Prime Delhi have witnessed a price CAGR increase of 15-17% over the last 35-40 years. Based on recent transaction, prime South Mumbai [Carmichael Road] bungalows have registered 15% CAGR over the last 60-70 years.

RBI Checkmates Luxury Residential Projects

The RBI has introduced three measures, which we believe will primarily
impact premium and luxury residential projects.

The RBI has increased the risk weight for residential housing loans of INR7.5m and above, irrespective of the loan-to-value (LTV) ratio, to 125%. However, risk weights for other loans remain unchanged.

So Luxury in India means over 75 Lakhs.

The LTV ratio for home loans has been capped at 80%. Lenders typically have an average LTV ratio of 70%. Hence, we see no significant impact on end-user demand from the 80% LTV imposition. The LTV however, should curb price rises and speculation over the near term in the luxury segment.

The RBI has raised the standard asset provisioning for all 'teaser rate' loans to 2%, from 0.4%. We believe this would end the 'Teaser rate' campaign wherein lenders offered a lower initial 'interest rate' (50bps below the current rate) and calculated affordability (or ability to service loan) of a buyer on the lower interest rate

Mumbai Residential prices riding high

Across all the major micromarkets, prices have risen by 10-30% since April 2010. This is after the 20-40% increases in the period October 2009–April 2010. For example, prices in Borivli, a western suburb in Mumbai, are currently at Rs8,000-11,000p sq ft, up from last year’s Rs6,000–8,000p sq ft.

Here are the latest property prices as we obtained from the Exhibition,

Ackruti Sunmist Andheri 16,600
Rustomjee Elanza Malad 12,500
Ackruti Gardenia Mira Road 4,800
Gundecha Symphony Andheri 13,800
Kalpataru Kalpataru Gardens Kandivali 9,500
Kalpataru Kalpataru Towers Kandivali 9,800
Lodha Eternia Andheri 12,500
DSK Developers Madhuban Andheri 7,700
Hiranandani Hiranandani Heritage Kandivali 11,200
Runwal Runwal Elegante Andheri 15,000

Ackruti Vedant Sion 12,500
Ackruti Siddhi Thane 6,300
Nirmal Lifestyle Citi of Joy Mulund 7,776
Nirmal Lifestyle Lifestyle City Kalyan 2,547
Lodha Imperia Bhandup 8,200
Hiranandani Estates Thane 6,700
Gundecha Zenith Mulund 7,200
Nirmal Lifestyle US Open Mulund 7,200
Hiranandani Meadows Thane 6,700
Runwal Pearl Thane 5,200
Runwal Greens Mulund 7,300
Kalpataru Aura Ghatkopar 9,500
Godrej Properties Riverside Kalyan 2,950

Continued strength in volumes at current price levels would hinge on: 1) expectation of continued growth in personal disposable income, i.e., a robust job environment; and 2) stable interest rate.

DB Realty Project Pricing Mumbai

Here is the Rate at which DB realty has sold some of its properties in Mumbai.

INR / SFT.

Orchid Ozone Dahisar 4,947
Orchid Suburbia Kandivili 9,470
Orchid Woods Goregaon 10,778

Orchid Turf View Island City 40,000
Orchid Heights Island City 19,997
Orchid Crown Island City 23,888

Supply Vs Absorption Trends Across India

The Real Estate Absorption has been the highest in 2 years in Aug-Sept in most markets. Realtors are slowly exhausting their inventory and have slowed down new launches. Here is what he scenario is in the Metros.

Gurgaon recorded average monthly absorption of 1,726 units/months in Jul/Aug. This is 23% lower than 2Q average. On YTDCY10 basis the absorption run rate is down 4% as compared to CY09 average. Months of unsold inventory are at its record low of ~7 months.

Absorption pick up in Noida/Greater Noida has been astonishing as run rate in CY10 has tripled from 2009 levels. New launches by Jaypee Infratech and Supertech have contributed a lot to this.

Average monthly sale run rate in Jul/Aug (4,186 units/month) in Mumbai (including Navi Mumbai and Thane) declined by a 13%. Within Mumbai, South Central Mumbai have fared the worst with volumes down 40% Q/Q.

Absorption run rate (at 1,950 units/ month) in Bangalore picked up 13% Q/Q in 3Q despite July being a seasonally weak period (Amavasya). Overall residential volumes in Bangalore are up 13% Y/Y. Months of unsold inventory has been coming down consistently over the last two years and is the Worst Market for Investors because of unstable Government and Massive Money Laundering by Local Politicians.

Chennai is witnessing steady pick up in absorption with 3Q10 sales run rate (1,484 units) higher by 21% from 2Q10 levels. Overall residential volumes in Chennai are up by 5% Y/Y.

Investors Punish Shady Realty Business Stocks

It is a well known fact across the world that Indian Real Estate is a shady business backed by Politicians and Mafia Dons taking hardworking legal & ethical Indians for a ride. It may come as a surprise to readers of this article from else where in the world, but the fact is the Indian society has accepted the evil of Parallel Economy / Black Money and majority of the elected representatives are against curbing this.

Anyway, the main theme of our write-up is how Real Estate Stocks have Destroyed investors Wealth and are still far from their 2008 Highs. So I hope you now understand our bearish stand on the Indian Real Estate Stocks.

• Anant Raj Industries - High 360 - CMP -148
• Ansal Properties - High 400 - CMP - 95
• Brigade Enterprises - High 300 - CMP - 150
  
• DLF - High 800 - CMP - 386
• HDIL - High800 - CMP -272 [Bonus 1:1]
• IndiaBulls Real Estate - High 600 - CMP -180
• Jai Corp - High 6000 - CMP - 256 [Suspended / Splits - Backed by Chela of Mukesh Ambani. Stay away]
• Omaxe - High 400 - CMP - 144
• Orbit Corp - High 400 - CMP -125
• Parsvnath Developers - High 400 - CMP -145
• Peninsula Land - High 800 - CMP -68 [Split ]
  
• Purvankara Projects - High 400 - CMP -132
• Sobha Develoeprs - High 800 - CMP -390
• Unitech - High 180 - CMP -94

Just BUY one Dream Home as it is impossible to fight the Politician-Mafia nexus in Real Estate and continue to invest in other Diversified industries and profession for Growth and not Real Estate.

Delhi NCR Current Prices - Residential Segment

Here is the latest update on the REsidential Apartment Property Prices in Delhi / NCR - Gurgaon, Noida, Manesar and Greater Noida as of Sept 2010.

Prices in INR / SFT.

New Delhi:
Prithviraj Road 50,000
Aurangzeb Road 50,000
Chanakyapuri 45,000
Golf Links 45,000
Shanti Niketan 35,000
Vasant Vihar 30,000
Anandlok 27,000
Friends Colony 25,000
Greater Kailash - I & II 20,000
Mayur Vihar 14,500
Okhla Tehkhand 12,750
Shivaji Marg 11,000
Model Town 8,700
Kapashera 5,000
Dwarka 5,000

Gurgaon/Manesar
DLF Phase V 7,600
Sector 66 6,000
Sushant Lok III 6,000
Sector 50 5,800
South City II 5,500
Sohna Road 4,700
Sector 109 3,200
Sector 103 2,900
Manesar 2,600
Sector 91 2,600
Dharuhera 1,900

Noida:
Noida EM Bypass 4,500
Jaypee Greens 6,000
Unitech Grande 6,000
Sector 52 4,500
Sector 100 3,700
Sector 119 3,300
Sector 77 3,200
Sector 143 3,050
Sector 137 3,000

Greater Noida:
Jaypee Greens 6,000
Gautam Budh Nagar 2,300
Taj Expressway 2,200
Noida Extension 2,100
Dadri 2,100

Bangalore Residential Apartment Prices

Here is the latest prices in Bangalore / Bengaluru for Residential Apartments in various pockets of the city. Bangalore is probably the only city in India which has severely lacked in developing infrastructure compared to the Industrial Growth rates witnessed in the City. Courtesy - Highly Corrupt Politicians Across the Entire State.

Lavelle Road 18,000
Ulsoor 15,000
Malleswaram 6,000
Koramangala 5,000
Sanjay Nagar 5,000
Jayanagar 5,000
JP Nagar 4,500
Hebbal 4,000
Whitefield 3,400
Bannerghatta 3,200
Sarjapur 3,200
Yelahanka 3,140
Kanakpura 2,900
Devanahalli 2,800
Electronic City 2,600
Tumkur Road 2,400
Doddaballapur 2,200

Mumbai West + Navi Mumbai - Apartment Prices

In contnuing our coverage on Mumbai Property Prices for Residential Apartments at the end of Sept-2010, here is our data in Western Mumbai and Navi Mumbai.

Western Suburbs Property Prices: Residential Apartment Price INR / SFT
Bandra West 20,000
Bandra East 15,000
Khar 18,000
Santacruz 15,000
Vile Parle 13,000
Andheri 11,500
Jogeshwari 8,000
Goregaon 9,000
Malad 8,000
Kandivali/Borivali 7,500
Dahisar 6,000
Mira Road/Bhayander 3,500
Virar/Vasai 2,800

Navi Mumbai Apartment Prices:
Vashi 7,000
Airoli/Sanpada 5,000
Nerul/Belapur 4,500
Kharghar 4,000
Panvel 2,800

Also Check out new Apartments Projects Launched in Bangalore & Delhi NCR.

South Mumbai + Central - Property Prices

Here is the Latest property Prices for Residential Apartments in South Mumbai and Central Mumbai. These prices have been taken into account after following and tracking deals at these locations for Residential Apartments in Sept-2010.

South Mumbai & City Residential Apartment Prices:
Colaba/Cuffe Parade 50,000
Marine Drive 40,000
Napean Sea Road 40,000
Worli 30,000
Mahalaxmi 25,000
Mumbai Central 23,000
Lower Parel 22,000
Dadar/Mahim 16,000
Byculla 16,000
Sewri/Parel 12,500
Sion 12,000
Wadala 12,000

Mumbai Suburbs Residential Apartment Prices / SFT
Kurla 7,000
Chembur 8,000
Ghatkopar 9,000
Vikhroli 6 ,500
Bhandup 6,500
Mulund 6,800
Thane 5,500
Dombivali 3,800
Kalyan 3,000

Bangalore Residential Prices to surprise positively

Merrill Expects the Street to be positively surprised by a 10-15% price increase with sustained volume growth in Bangalore over the next 12 months. Key reasons for strong trends are: 1) expected high-income growth for IT employees (50-60% of demand) led by attrition and wage hikes, 2) falling inventory levels due to lower launches and strong sales, and 3) four fold increase in IT/ITeS employees who can afford houses in Bangalore in last four years. Residential real estate prices in the city are still 10-15% below the 2007 peak vs Mumbai/NCR at over 10-25%.

Residential prices in Bangalore have increased by 10-15% from the lows seen in 2009, but continue to be below the peaks seen in 2007 by 10-15% in most of the micro markets. In the next 12 months, we expect the developers to increase prices by another 10-15% to reach the peak levels. However, prices in most of the micro markets for mid-income housing would still be around Rs3,300-3,500/sq ft.

Land Reforms - Likely at a Higher Price

Unlike China, India doesn't have any control on Costs. Right from day one we have said that India can never replicate the Chinese model of SEZs and you know the mess 4 years after we have said.

As India moves to a higher growth trajectory, industrialization and urbanization will necessitate the continuing need for land acquisition. There will constantly be issues that will warrant an effective balancing act between development and the EEE. There could be delays and at times politics may prevail over economics. However, if land reforms do come through, it should speed up economic development but will most surely come at a higher financial cost for business and be supported by higher socio-economic pay-off.

This makes reform imperative on (i) land acquisition related issues and (ii) viable resettlement and re-habilitation policies. To this end, the recent political focus and proposed amendments in land acquisition/mining bills (annuity and royalty/profit sharing) - if implemented could unlock development value that's currently trapped in land.

Omaxe's Outlook for Industry + Regulator

Omaxe Ltd CEO, Rohtas Goel has the following views for the Industry and the Real Estate Regulator.

Indian Real Estate is still in the initial stage of business cycle. There is still gap of more than 25 million dwelling units and 90% of demand falls in affordable housing category. It is going to be a long-term game and this business shall be perceived as any other manufacturing business where the play will be more of volume than value. There are still lots of unorganized player in the market which give immense scope for branded players like us to explore new territories.

real Estate Regulator in India - The Draft Bill on Model Real Estate Act, which is a need of the hour, is meant to promote planned and healthy real estate development with a view to protection of consumer interest on one hand and to facilitate smooth and speedy construction on the other. Moreover, one of the prime objectives of the bill is to remove malpractices and fly-by-night developers. The initiative taken by the ministry is commendable and seems to be a step in the right direction. However, there are certain provisions proposed which may defeat the very purpose for which the act has been proposed. According to planning commission survey, there’s a shortage of approx. 24.7 mn housing in India and if the draft bill is introduced in its present form then it would hamper rather promoting India’s real estate development.

Besides, the developers that are working to meet the acute shortage of dwelling units, which is in country’s interest, will be refrained from working at the desired pace. The proposed act in its present form will add costs and delays to the lifecycle of the project. In our opinion simplifying the approval procedures, facilitation, regulation, control and growth of real estate development and safeguarding interest of all stake holders should be its objectives.

Dream of Slum Free Mumbai

Slum-free Mumbai: Myth to Realty - Steps envisaged. The CEO, SRA reiterated government focus on slum rehab in Mumbai, with 0.2m houses under construction (vs. 0.15m delivered). He also highlighted plans to amend some laws in favour of private developer participation in North Mumbai rehab.

Commercial Property: Road ahead. Commercial recovery can be faster than estimated, given improving transactions, albeit only in certain markets. IT/ITES will remain the most important space absorber, followed by telecom and financial services sectors. Although recovery will be micro-market specific, Bangalore emerges the best-placed for commercial recovery amongst other metros.

Developers reiterate more focus on execution of projects with continual focus on residential projects as well as reducing debt. Cash-rich companies are acquiring land across city centres and suburbs. Overall, Bangalore is the steadiest market with inventory being delivered and new project launches at lower-than-peak rates.

DTC Bill: SEZs Look OK -

Changes to the Direct Tax Code (DTC) Bill introduced in the parliament last week should retain the attractiveness of (new) Special Economic Zones (SEZs) for both developers and tenants at least for the next 3-4 years.

Profit-linked tax exemption (100% for a block of 10 years in the first 15 years) for developers for SEZs notified before April 1, 2012.

Profit-linked tax exemption (100% for the first five years, 50% for the next five years, and 50% of invested profits for a further five) for tenants (such as IT companies) commencing operations before April 1, 2014 (April 1, 2011 in earlier draft).

One disappointment was not in the original draft – imposition of Minimum Alternate Tax (MAT) at 20% for both tenants and developers. MAT credit can be offset over ensuing 15-year period.

The new proposals in the DTC Bill should address industry concern about the invested capital, such as land acquisition, in (small format – 10-50 hectare) SEZ projects and should ensure better occupancy. Large format (a few thousand acres) SEZs (e.g., Worldcity Jaipur) could face challenges beyond the medium term to attract tenants, if these rules remain unchanged.

Prime Residential Prices in Delhi + Mumbai + Bangalore

Here is the pricing of Prime Residential Real Estate in the following Cities. All prices in INR / SFT

Mumabi
South Central (Altamount Rd., Malabar Hill, Napeansea etc) 44,000
Central (Worli, Prabhadevi, Lower Parel / Parel) 22750
North (Bandra (W), Khar (W), Santacruz (W), Juhu) 20000
Far North (Andheri (W), Malad, Goregaon) 10500
North East (Powai) 7500

Delhi NCR
South East (New Friends Colony, Kalindi Colony, Ishwar Nagar) 16500
South Central (Safdarjung Enclave, Sarvapriya Vihar, Panchsheel) 20000
Gurgaon 5900
Noida 4450

Bangalore
Central (Brunton Road, Artillery Road, Ali Askar Road, Cunningham Road) 6000
South East (Koramangala, Jakkasandra) 3250
Off Central (Vasanth Nagar, Richmond Town, Indiranagar) 4750
North West (Malleshwaram, Rajajinagar) 4600
East (Marathalli, Whitefield, Airport Road) 3000

Residential Absorption Rate

Carefully study the Residential Apartments absorption rate and available inventory to see where the prices will go next. Government policy likely to be fairly stable.

Gurgaon recorded average monthly absorption of 2,242 units/months in 2Q10. This is 13% higher than 1Q average and largely stable at CY09 average. Months of unsold inventory (~6 months) continued to decline in the market and is currently at its two year low thereby keeping pricing relatively strong.

Absorption pick up in Noida/Greater Noida has been astonishing as run rate over Apr/May tripled from 1Q levels. New launches by Jaypee Infratech and local developers have contributed a lot to this. Key launches Supertech's Ecovillage in Greater Noida and Jaypee’s Kensington project in Noida.

Average monthly sale run rate (4,816 units/month) in Mumbai (including Navi Mumbai and Thane) in 2Q stabilized (up 2% Q/Q) after witnessing a 13% volume decline in 4Q10. Months of unsold inventory continued to decline in the market and is currently at its two year low of 9 months.

Average monthly sales run rate (1,725 units) over 2QCY10 in Bangalore were largely flat after witnessing 13% decline in 1Q. Decline in 1Q was primarily on account of seasonal weakness. Months of unsold inventory has been coming down over the last one year; however it still remains high at 15 months thereby keeping the prices under check.

Chennai is witnessing steady pick up in absorption with average sales run rate (1,307 units) over Apr/May increasing by 23% from 1Q10 levels. Months of unsold inventory has been declining over the last one year.

Office Space Recovery Gaining Traction

Leasing activity picked up during the quarter with 7.3msf of office space being absorbed in 2Q10 vs. 6.3msf in 1Q10. 2010 is expected to witness 52msf of office supply as against estimates absorption of 29msf. This will further push the vacancy levels higher to over 20% from 18% currently.

Majority of the supply expected to be added in 2010/2011 is at advanced stages of construction.

Delhi NCR2Q10 witnessed increased level of transaction activity especially in Gurgaon & Noida given availability of quality supply at affordable rentals and flexible lease terms. Overall 2Q10 absorption stood at 2.2msf (up 126% Q/Q) with SEZ accounting for 50% of the total.

Supply for 2Q10 stood at 1.5msf (vs.0.8msf in 4Q) on account of completion of significant projects during the quarter. The entire supply was concentrated in the suburban locations. 3.3msf of supply is expected to be added in 3Q.

Rentals remained largely stable across most markets. C&W expects rentals across majority of the markets to strengthen in the medium term.

Mumabi - Mumbai witnessed absorption of 1.7msf in 2Q10 with fresh leasing picking up meaningfully during the quarter. SEZs in Thane Belapur accounted for >20% of total absorption for the quarter.

Overall vacancy rate remained stable at 14-15% in 2Q 2010 as supply continues to outstrip demand especially in the Andheri, Malad and Thane Belapur micro markets. CBD vacancy levels however increased on account of tenant movement to new buildings in suburban locations (Lower Parel/BKC).

Rentals remained largely stable across most micro markets and the trend is likely to continue given sizeable supply addition expected in suburban Mumbai (7msf primarily coming in Andheri, Lower Parel).

Bangalore2Q10 witnessed absorption of 2.4msf primarily coming from earlier pre - commitments in buildings which were delivered during the quarter. Avg. transaction sizes also increased (>70,000sq ft) as compared to last quarter.

Bangalore witnessed 6.2msf of completion in 2Q10 with Whitefield accounting for ~77% of the total supply. 3Q is expected to witness 4.2msf of office supply.

Rentals have largely remained stable over the last quarter with the exception of CBD/off CBD location given limited supply addition in the micro market. C&W expects the rentals to start strengthening in select micro markets over the next 2-3 quarters.

Chennai + Hyderabad + Pune - Property Market

Supply has been smartly constrained in Chennai over the past two quarters while demand in 2Q CY10 was the highest since 3Q CY08. As a result, rents have stabilised although since upcoming supply is large, upsides to rents may still be further away. Due to the low supply, vacancies have shown a small correction and now stand at 22%, with most vacancies on the OMR and GST Road locations. Chennai could benefit from some increased IT demand in CY10 if the political situation in Andhra Pradesh (Hyderabad) does not improve.

Supply in Hyderabad continues to exceed demand leading to very high vacancies of 29%. Rents have not yet stabilised but have fallen 28% from the peak. We expect supply to continue and believe rentals could remain under pressure for two more quarters. Strong demand is unlikely until the political uncertainty in the state eases.

Demand has picked up in Pune over the past two quarters while supply has been constrained. Demand is now the highest in the past eight quarters while supply is the
lowest. Demand is picking up in the eastern part of the city rather than the more traditional western suburbs due to better social infrastructure. Following better demand and low supply, rents have started moving up while vacancies have declined marginally. However, supply pressure is expected to restart in 2H CY10.

Bangalore + Mumbai - Property Trends

Bangalore registered a large spike in supply in 2Q CY10, with Whitefield accounting for 77%. This is on very low supply in the previous four quarters. Vacancy levels remained stable, although in the 16% range, and demand remained moderately strong. Larger transactions have also started as confidence amongst IT/ITeS companies returns. Rents have also started showing signs of a pick-up and we expect them to strengthen, especially in the Outer Ring Road area and for IT SEZs.

In the past two quarters, demand has reached the highest levels since 1Q CY08. However, vacancies remain high, especially in the north-western and north-eastern suburbs. Vacancy levels in the central business district (CBD) in South Mumbai are increasing as tenants move to cheaper locations and larger and more modern buildings. As a result, CBD rents fell 14% y-y, while rents in the rest of the city were flat y-y. Rents have started picking up in the secondary business district (SBD) locations of Bandra-Kurla Complex and Lower Parel although rents in Lower Parel should remain stable now, with supply picking up.

FDI Regulations to be Relaxed for Greedy Developers

As per press reports, there is expectation that current regulations on FDI into the sector could be relaxed on two fronts (1) clarification that the three-year lock-in is applicable to only minimum capitalization (US$10 million for wholly owned subsidiaries and US$ 5 million for joint ventures with Indian partners) versus the current interpretation that the entire capital invested is locked in for that period and (2) reduction in minimum project area (for FDI investment) which, at present, is 10 hectares in the case of serviced housing plots or 50,000 meters in case of construction – development projects.

This means the Lazy Fat Developers who are ready to suck you will get more capital and won't sell the stock until you meet their unrealistic expectation. It is a pathetic situation that an organization like RBI is a puppet in the hands of the central government which will just keep quiet paving way for the Rich Developers to get Richer at the cost of Hard Working Indians Like You.

Chennai - Hyderabad - Apartment Prices / Sales Trends

The volume trend in Chennai after falling in Feb and Mar 2010 has recovered in Apr and May 2010 to resume its flattish trend. Average monthly volumes between Apr 2009 and May 2010 are at 1.5mn sqft, lower than the 1.8mn sqft between Jul 2007 and Jun 2008. Inventory with developers continues to decline with unsold stock at 18.7mn sqft. In terms of months of sales, it is at 11 months, which indicates levels usually seen in late 2007 and early 2008.

Hyderabad is the worst performing city among the top 6 urban agglomerations in India. Sales have consistently declined since Aug 2009 and they are now close to the 2008 crash lows. This follows the Telengana statehood issue and the consequent lack of clarity on Hyderabad’s status as the capital city. Although inventory with developers is declining, it is also very high at 50mn sqft and 30 months of sales. New launches have also reduced significantly since Aug 2009. We expect residential volumes in Hyderabad to remain muted in the medium term if the Telengana issue is not resolved.

Gurgaon - Greater Noida - Residential - Prices vs Sales

Gurgaon is in a similar situation as Mumbai with volumes, which were falling till Apr 2010, reviving to some extent in May 2010. Prices in Gurgaon have now moved up 20% y-y on average and volumes are not likely to show any significant upward movement in the medium term, in our view. Unsold stock with developers at 29mn sqft has come down 44% from the peak, while inventory is down to just 6 months of sales which is the lowest since this data is available. We believe that prices could move up further in Gurgaon unless launches pick up pace and we expect this to start from Sep 2010.

In the past 6 months, Noida and Greater Noida have recorded cumulative volumes in mn sqft, which are equal to cumulative volumes in the past two years. The number of units sold in the past 12 months (May 2009 to May 2010) is 4 times that of the units sold between Jul 2007 and May 2009. This large jump has not been led by any noticeable increase in employment activity in the region or any fall in pricing.

There is a lot of investor activity in this market, especially in projects on the Noida-Greater Noida expressway and the new Noida extension area. Large projects are being launched in Noida, leading to inventory levels moving up in absolute terms, although in terms of months of sales it is extremely low at 4 months. The actual inventory in the system though would be much higher because of the warehousing of these projects with the brokers. We believe that the model of sales to brokers is not a sustainable one and is likely to result in significantly large receivable issues for some of these developers going forward if the market takes a downturn.

Mumbai Property Price Vs Sales Trend

Residential volumes in Mumbai have moved down since Dec 2009, and in Apr 2010 volumes were down almost 35% before recovering somewhat in May 2010 to about 5mn sqft. Pricing increases of 35% y-y have stalled the recovery in volumes, although prices could still be considered reasonably healthy.

Inventory with developers has started moving up again as new launches have shown a sharp increase in the past two months with almost 14.5mn sqft of projects being launched. Inventory in terms of months of sales, at 9 months currently, has gone below the 2007 boom time levels, which we believe has led to the continued increase in prices.

We believe that volumes are unlikely to see an upside from current levels till prices move down, which may not happen until inventory increases significantly from here, especially in relation to demand. We believe that prices in Mumbai may stay high for another 9 to 12 months before increasing inventory starts pulling down prices.

Bangalore Residential Price Trends

Bangalore property market is showing steady signs of improvement on the back of a pick up in hiring activity and wage growth returning to the IT sector. Managements’ confidence in the physical market has markedly improved as seen in aggressive new launch plans for FY11 which are now being announced after a gap of almost 2-3 years. Most companies are launching projects that are 3-4x their historical sales levels in FY11 as unsold inventory levels have started to decline.

Our recent trip to Bangalore involving site visits and meetings with listed and unlisted developers/brokers/financiers shows that while the recovery is as yet nascent it is expected to pick up steam going into 2H. Transaction volumes in the residential segment have picked up noticeably over the last few quarters and the trend seems to be holding. Affordability both for residential and office segment remains healthy and this should propel volumes as demand returns.

Affordability in Bangalore’s residential market is healthy as pricing has not picked up materially, even as wage growth of 10-15% has started to return. Transaction volumes in the market have increased by 25% Y/Y over 2HFY10 and the trend seems to be holding. Our interactions with HFCs suggest that Bangalore is the only market which is showing growth in new customer acquisitions. Office rentals too seem to be bottoming out and leasing transaction is picking up driven by large MNCs.

Demand in Mumbai for Mid Priced Properties - Sarang Wadhawan

HDIL is one of the main Developers in the Island City of Mumbai. HDIL's promoter Sarang Wadhawan in an interview has the following views of the City's changing landscape.

Outlook on residential prices and volumes in the island city of Mumbai and in the suburbs of Mumbai?
Across Mumbai prices have gone up substantially in last 12 months. In most cases it has reached peak of 2007, while in some it has gone beyond 2007 levels. But the important differentiating factor has been that in last 1-1.5 years developers have been concentrating on launching affordable-mid income residential product catering to larger population. While in the earlier cycle most were concentrating on commercial and high end residential. So projects targeted at middle class and priced between Rs2500-Rs8000/sq ft in the suburbs continue to do well. If products are priced correctly, then demand is not an issue in suburb in Mumbai.

Which product types (residential- mass/ luxury, commercial and retail) are likely to see the most action in the next 12 months and the next 3-5 years?
In Mumbai before the crisis, the developers were largely concentrating on commercial, the revival of market happened through residential. We plan to focus on residential in Mumbai for next 12 -18 months. We will continue our focus on affordable/ mass housing where there is huge demand and continue to sell in volumes. There will be some luxury projects also but majority will be governed by affordable mid income housing. If real estate market starts improving further from here, over 3-5 years, developers will start shifting focus back on retail/ commercial. But for next 2-3 years Commercial will take a back seat as current supply is enough for 2-3 years.

On Airport slum rehab project
The construction work is on at 3 locations in Phase I. The work started at these locations between Apr 08-Oct 08 and in last 18-20 months almost 12mn sq ft of construction work has been done at these sites including various amenities like hospitals, primary schools, sewage treatment plants, police station etc. We were targeting movement of people to these sites from April 10, but BMC had asked us to delay the movement due to shortage of water. BMC will review the water situation in July 10. We are hopeful that due to good monsoon, we will get BMC approval in July so that people can be shifted from August/September.

What are current trends on TDR prices and volumes in Mumbai?
The TDRs are not linked to movement of the families but to construction of the rehab units. Currently TDR prices are above Rs3000/sq ft. We expect the prices to remain above Rs 3000 / sq ft in near future. We are targeting volume of 5-6mn sq ft in FY11.

Various Projects of HDIL:
We have 63mn sq ft under construction including the Airport project. ON the floor construction would comprise of ~30mn sq ft. Of this, residential would be around 8mn sq ft (75% of this is pre sold in range of Rs2500-8000/sq ft) and commercial 4mn sq ft( 20% pre leased). Remaining 18mn sq ft is slum rehab projects including Airport project.

Delhi NCR: Recent Launch Prices

Here is the Latest Delhi NCR Latest residential Property Launch Prices

Price in INR / SFT [Super Built-Up Area]

DLF Capital Greens III Delhi, Shivaji Marg 12,000
Ireo Victory Valley Gurgaon, Sector 67 5,250-5,650
Unitech South City - II (Independent Floors) Gurgaon 4,100-5,100
Unitech Vistas Gurgaon, Sector 70 3,200
Unitech Sunbreeze 2 Gurgaon, Sector 69 3,900
Ansal API Esencia Gurgaon, Sector 67
BPTP Park Serene Gurgaon, Sector 37D 3,200
Jaypee Greens Kensington Park Noida, Sector 133 2,800-3,000
Jaypee Greens Kasa Isles Noida, Sector 129 2,900
Paramount Industries Floraville Noida, Sector 137 2,600
Logix Group Blossom County Noida, Sector 137 2,775
Jaypee Greens Kensington Park Heights Noida, Sector 133 2,970
Gardenia India Ltd Gardenia Golf City Noida, Sector 75 3,050
Jaypee Greens Kingswood Oriental Noida, Sector 128 8,100
Jaypee Greens Kensington Boulevard Noida, Sector 131
Logix Group Paras Tierea Noida, Sector 137 2,750

Gurgaon Pricing and Noida Volumes Sizzling

Morgan in a Property Ground Survey of Delhi has the following report,

New launch momentum continues (35.5k in 1Q, the highest in the last nine quarters) and new sales were strong – 21.6 k units pre-sold. Gurgaon prices appear to be rising quickly and Noida volumes appear too good to sustain.

Three corners of Gurgaon offer “something for everyone” – Sectors 92-110 (IBREL, Raheja and Mahindra Lifespace launches – Rs2,200- 2,900 psf), Sector 66-70 (UT, Ansal, BPTP launches – Rs2,700-3,900 psf) and Phase V (DLF, Ireo – Rs5,000-8,000 psf). Volumes are healthy – new sales (4000 units = trailing four-quarter average) and new launches remain disciplined. However, primary market pricing (Ireo’s Arch, DLF Phase V, UT’s Sunbreaze) appear 25% higher in the last six to nine months.

New sales in 1Q was 3.5x Gurgaon (14k units); new launches were 6x Gurgaon (30k units); and available unsold stock (vacancies) was 2.2x Gurgaon (33k units). Intuitively, Noida should have all numbers lower than Gurgaon given that its stock of commercial properties (proxy on size of local economy) is less than one-third of Gurgaon’s. Our channel checks indicate that NCR has a fair component of broker-driven (underwritten) sales, which may be returned to developers if unsold. The silver lining in Noida is good pricing discipline so far (Rs2,900-3,300 psf).

Margins of Mahindra Life Space

Often as a Home Buyer you must have wondered what is the margin for Realty Developers. Here is authentic data from Edelweiss Capital on the margins of each project of Mahindra Lifepsaces.

Lower Parel likely to be over supply zone

Lower Parel has emerged as a major corporate destination in South Mumbai
after Nariman Point, particularly after seeing significant commercial development on defunct mill land. Many corporates have built corporate offices in the area while many more are in the pipeline. The area has also seen the development of many high-end residential projects, particularly in the last three to four years, targeting the elite South Mumbai buyers.

Going forward we believe that 1) Lower Parel is likely to see supply of over 10 msf in next 3-4 years thus making it an over supply zone 2) Prices in this zone is likely to correct taking into consideration above supply, supply of NTC mills, not yet factored in(3) Surroundings areas like Worli, Prabhadevi, Mahalaxmi etc will be buyers first choice taking into consideration better infrastructure facilities. We believe new launches from DLF, Lodha Raheja has to be at decent price (Rs 15,000-20,000 psf) to bring absorption in Lower Parel.

Big players like DLF and Lodha are expected to launch high-end projects in Lower Parel – in our opinion, to drive absorption levels, it is critical that these projects are rightly priced. We believe that prices at Lower Parel should be discounted to Worli, Mahalaxmi and Prabhadevi due to quality of infrastructure facilities and congestion levels. Lower Parel may also see higher absorption if lower unit size of 1000-1500sq ft is introduced as against the current average unit size of 2500 sq ft.

Premium Properties Central Mumbai - Price List

We have obtained the rates of premium property launches in Central Mumbai and they are as follows.
Name of Property / Developer / Location / Price INR/sft / Completion

• Orchid Heights DB Realty Jacob Circle 22,500 Mar 2013
• Orchid Turf View DB Realty Mahalaxmi 60,000 Mar 2013
• Orchid Crown DB Realty Prabhadevi 27,000 Dec 2012
• Orbit Terraces Orbit Corporation Lower Parel 22,000 2012
• Orbit Grand Orbit Corporation Lower Parel 19,000 2011
• The Residences Unitech Parel 11,500 2012
• Indiabulls Sky Indiabulls Real Estate Lower Parel 24,000 2013
• Indiabulls Sky Suites Indiabulls Real Estate Lower Parel 20,000 2013
• Indiabulls Sky Forest Indiabulls Real Estate Lower Parel 21,000 2013
• DLF – NTC Mills DLF Lower Parel 25,000 2013
• Lodha Bellissimo Lodha Group Mahalaxmi 25,200 Dec 2010

You can contact the Developers Directly and Negotiate for the prices instead of going through a broker.

NHB Residex - India's Residential Property Index

Property Bulls have a big reason to worry as NHB Residex data confirms the myth that Property is no more a safe investment as it is in the minds of real estate people.

Look at what has happened to the Bangalore property market in the past 3 years. More volatile than the BSE Sensex which is playing to the tunes of Global economies.
You can track the NHB Residex on the official Website here.

NCR Recovery to be Gradual

Although absorption continues to be healthy in NCR, we believe increased FSI for group housing projects in Noida and fresh land auctions would cap rapid price rise. We estimate marginal 5-10% appreciation across the NCR over CY10-11. During Q1CY10, over 50,000 apartments were launched with delivery timeline of 36 months.

After registering a slowdown in new project launches in CY09 due to unabsorbed inventory and sluggish demand, Q1CY10 has seen the launch of a number of new projects in Gurgaon/Noida/Greater Noida. Over 50,000 apartments are planned to be constructed over CY10-12. The Noida-Greater Noida region has seen the highest number of launches (over 35,000 apartments) by major developers including Jaypee Infratech, Unitech,

Majority of the projects were launched in the Rs2,000-3,000psf price range with completion timelines of 36 months. Due to the enhanced FSI in Noida (2.5x for group housing projects from 1.5-1.75x earlier) and new land auctions in Noida Extension in H2CY09, about 75% of the new launches have been in the Noida/Greater Noida region with the thrust being on affordable housing projects.

Analysis of Lodha - Wadala land deal

Lodha Developers bagged a 6-acre plot in Wadala, Central Mumbai, for a cumulative price of Rs40.5bn. The plot has a developable area of 495,000sqm or 5.3msf. With total estimated saleable area of ~7.6msf (70% residential), we estimate the project’s NAV at Rs31.3bn and has the potential to add over Rs100bn of housing stock in Central Mumbai over FY11-16. We believe this project would result in an oversupply in the premium segment in Mumbai. We reiterate our view of a 10-20% price correction across projects in Mumbai.

The acquisition at Wadala has the potential to add additional 2,500-5,000 units over the next 4-5 years in the premium/super-premium segment representing potential sales value of over Rs100bn. In such a scenario, we believe that prices in South/Central Mumbai would be under pressure and there is a possibility of 10-20% price correction in Mumbai on the back of this oversupply. What say ?

Sales Drops - Unsold Inventory Stable

In the Mumbai region about 4,700 units/month were sold on average in 1Q10, down 18% from about 5,700 in 4Q09. However, the months of unsold inventory is 8, which is the lowest level since January 2008.

In Gurgaon, about 1,950 units/month were sold in 1Q10 vs. about 2,400 in 4Q09 and about 2,100 in CY09. There was a pick-up from about 1,650 units sold in February to over 1,900 units in March. Sales in Noida/Greater Noida accelerated to about 4,400 units/month in 1Q10 vs. about 3,000 in 4Q09, which we believe reflects a strong response to a launch in Greater Noida in March.

Bangalore, Chennai and Hyderabad, volumes are down by 8%-13% in 1Q10 vs 4Q09, but the 1Q10 rate is stable in context of the CY09 average.

Overall, the average pace of sales in 1Q10 all India basis is stable.

Anant Raj Technology Park, Manesar

The Manesar Technology Park project is almost complete. The project is located in Sector 8 in Manesar which is being developed by the government as Technology Park Complex across 140acres.

Office component ready and delivered: Anant Raj has completed the office development with leasable area of 1mn sq ft. Some of the tenants are in advance stages of completing the fit-outs and are expected to start operations in couple of months. The average rental from the office component is around Rs35/sq ft /month for the 60% of the area leased till date.

Retail - The project has around 40000sq ft of retail food court area. Anant Raj expects the retail part to get leased once tenants start operation in the office space.

Hotel: Anant Raj has leased the hotel space to a third party at rentals of Rs24/sq ft / month. The total area in the hotel is around 0.1mn sq ft. The tenant has tied up with Hilton for the operating its budget hotel – Hamptons and has started interior work for the hotel.

Interview with Pranav Ansal On property Market Outlook

Here are thoughts of Realty Developer Mr. Pranav Ansal of Ansal Properties and Infrastructure.

Most exciting real estate markets: Mr. Pranav Ansal believes that Gurgaon, Greater Noida and Kundli (on NH 1) in Delhi NCR, Lucknow and some select cities in Punjab including Mohali will be most exciting in terms of new launches and sales revenues in the next 12-month period.

Key segments expected to outperform: In the short to medium term, Mr Ansal expects residential segment and among residential mass segment which is expected to register the maximum growth.

Expectation on residential prices: Mr Pranav Ansal expects residential demand and prices to firm up further in the coming months. He has seen a good run up in prices in the NCR in recent months. He now expects prices in other key cities and tier 2 cities to catch up over the next 3 to 4 quarters.

We are also witnessing a trend of more and more people working/doing business in metros like Delhi, Mumbai, Bangalore, etc and hailing from cities like Lucknow, Mohali or Jaipur or other such cities want to acquire a residence, whether an apartment or an independent floor or a villa depending on their income levels, in their ‘native’ cities. This will be another growth driver for our residential projects in these cities. We also expect more investments by NRIs, with the improvement in economic situation in the US, UK and Canada which are the traditional strongholds of our company and countries like Australia and South Africa from where we are seeing a lot of interest of late.

The real estate regulator will be good for the industry in order to restore the reputation of the industry, which has been marred by the misdeeds of some of the smaller, fly-by-night operators in the industry. This will also help separate men from the boys and in the long run, lead to the much needed consolidation in the industry.

HDFC re-launches dual rate product

Soft interest rates coupled with a strong response to its earlier scheme has prompted HDFC to relaunch a limited period dual-rate home loan scheme. HDFC is now offering two-year fixed rate home loans (8.25% for 1st year followed by 9% for 2nd year) as compared to 8.75% floating rate (for loans up to Rs3 mn) offered currently. The scheme is currently available for limited period (loan applicants up to April 30, 2010) and we understand that the company has already tied up corresponding borrowings for the same, thus protecting its spreads. We believe that HDFC will extend the scheme if interest rates remain low.

We believe that excess liquidity in the system (investments under reverse repo are currently at Rs534 bn) is fueling the discount scheme and such schemes will likely be withdrawn when the excess liquidity in the system dries up. ICICI Bank and Axis Bank withdrew their discounted home loan scheme in March 2010, just two months within their launch, as liquidity had reduced.

NCR Proprty a Bubble - Merrill

Just seconds ago, BOFA-Merrill Lynch Analysts Pushed the Go on the Indian Realty Sector Report which talks of a Bubble in NCR property Market and a Recovery in other parts. Excerpts from the report,

The National Capital Region (NCR) is the area around New Delhi, the capital of India. This area has traditionally been one of the three key real estate markets in India (along with Mumbai and Bangalore). Residential sales volumes in city center locations reached historical highs from March 2009 till date, driven by some speculation and genuine end-user demand. This surge has also spilled over to suburban and remote locations, where our channel checks suggest that speculation contributes to as much as 75% of demand.

Some of this euphoria has also have spilled over to far suburbs and remote locations (such as Dadri and Greater Noida). Merrill visited the NCR thrice in the last quarter. Channel checks suggest that the pick up was primarily speculative to the extent that speculation outweighs genuine demand by a factor of 3:1 in these remote locations. They forecast a decline of over 30% in the monthly run rate of primary sales on average in the NCR and north India. The largest impact is likely to be felt in the peripheral areas of Noida and Gurgaon and the remote suburbs (e.g. Dadri).

Signs of a revival in high-end residential and commercial markets - A revival in high-end residential and commercial property remains our core thesis for 2010. Sale of high-end residential units in Gurgaon and Delhi has picked up.

Regulatory actions in last three years

Here is the chronology of regulatory actions in Real Estate in the last 3 years in India.

Feb-10 -Withdrawal of teaser home loan rates by a number of banks ICICI, HDFC, BOI etc
Feb-10 -Budget proposes imposition of service tax on sales/rentals and increases input costs (excise hike).
Feb-10 -RBI disallowed restructuring of loans for real estate developers.
Oct-09 - Increase in provisioning requirements for commercial real estate loans from 0.4% to 1%
Sep 09 - RBI eases lending norms for SEZs (classified as infrastructure lending)
Jul 09 -Extension of 80IB(B) scheme by one year and interest subsidy of 1 %
Jul 09 -Norms relaxation for SEZ development
Jan-09 - ECB norms for overseas lending relaxed
Dec-08 - Home loan rates on below Rs 20L segment to be cut by about 200bps
Dec-08 - Rs40B credit line to National Housing Bank to to kick start lending in the Rs 2MM category (priority sector lending)
Dec-08 - Permitted real estate loan restructuring upto Jun-09 as standard loans without requiring banks to classify these as NPAs
Nov-08 - HFCs allowed to raise short term foreign currency borrowings under the approval route
Nov-08 - Reduction in provisioning requirements on advances to the commercial real estate sector and home loans beyond Rs 2MM to 0.4%
Nov-08 - RBI reduced risk weightings on banks' exposures to commercial real estate to 100% from 150% earlier
May-08 -- Lower risk weight (50%) on home loans upto 30L (20L earlier)
May-07 -Ban on ECB's for township projects. Likely to hit the development plans of large developers
Jan-07 -Increase in provisioning requirements for real estate loans
Sep-06 - RBI asks banks to treat loans to SEZs as real estate loans
May-06 - RBI increases risk weightings on banks' exposures to commercial real estate to 150% from 125%
May-06 - Increase risk weightings and general provisioning of residential housing/commercial loans above Rs 2MM
Apr-06 - FII entry into real estate IPOs comes under scanner with RBI trying to classify it as FDI

Firstobject Technologies Visakhapatnam SEZ

Firstobject Technologies has received final approval from Visakhapatnam SEZ for setting up, operation and maintenance of the IT/ ITES unit in Visakhapatnam SEZ (VSEZ).

The VSEZ built up space has state-of-the-art satellite earth station within the zone premises for high speed data connectivity. The company is in the process of ramping up its manpower for kick-starting the operations by this month end.

Firstobject Technologies has also received earlier confirmation about allotment of built up space.

Affordable Housing - Promising Segment, But Losing

Affordable housing has been the bellwether in the recovery path, and most developers forayed into this segment during the liquidity crisis given the attractive demand/supply metrics. However, we had adopted a muted stance then on the sustainability of this model, as profitability was yet to be tested due to cost escalations/delays - this seems to be turning true now.

With economy bouncing back, the demand for premium/luxury housing is up. There is an increasing bent among developers to launch higher-margin projects. DLF sold high-end apt valued at Rs10bn in Dec’09 alone; IBREL sold apts priced at Rs70m- Rs225m in ‘Sky’ proj in Mumbai; and Puravankara’s 2010 launches comprise 67% of premium housing.

Though gov’t has extended 1% interest subsidy on loans for homes Given buyers’ price sensitivity, affordable housing will remain the way forward to tap potential housing demand in India.

Activity Slowdown - Delhi NCR Property Market

Goldman Sachs visited leading sites of Realtors in Delhi NCR and after Research on the ground, here is a snapshot of finding

• Absorption has slowed down from levels seen in late 2009, which may be as a result of significant price hikes. Channel checks suggest that overall market absorption may remain lower than 4Q2009 until the end of the monsoon season, but steady nonetheless.
• Prices of some residential launches have risen significantly since March 2009, by 20%-30% in some cases. However, there have been a number of launches by small local developers, which may temper any further price hikes until after the monsoon.
• There is end-user demand in Gurgaon, but investors and brokers account for a high proportion of sales in Noida and Greater Noida
• Office vacancy rates remain high in Gurgaon, Noida/Greater Noida. Rents are down 40%-50% from the 2008 peak but have bottomed
• While absorption is low, it is picking up and the recovery is likely to be gradual rather than V-shaped
  

Mumbai Property Registrations Drop in Feb

Property registrations in Mumbai (upto Dahisar in the north and Mulund in the east) remained steady but first signs of slowdown in transaction volumes are evident. After achieving a peak of 9,118 registrations in Dec 2009, Mumbai saw 6,022 registrations in Feb 2010, which represents about 6% MoM drop compared with 6,398 registrations in Jan 2010 and is the lowest number of monthly registrations since July 2009. We believe the rapid 30%-50% price increase across Mumbai will continue to dampen demand and we see no major upside risk to volumes in H1CY10.

Prices across Mumbai have almost crossed the peak levels in Q1CY08 and have risen by 30%-50% from lows seen in CY09 across micro-markets, making homes unaffordable for buyers even in an environment of improved job security and salary hikes. Developers have again chosen to focus on super-premium projects with ticket sizes of more than Rs50mn in southern and central Mumbai, where penthouses and duplexes are in vogue.

Latest Kolkata Property Prices

Kolkata Residential - The market for residential property has witnessed a distinct movement as Kolkata is breaking with the past. Projects of reputed builders such as DLF and Unitech are burgeoning in the peripheral suburban areas of Kolkata due to the emergence of the city as an upcoming IT destination of India. Upscale localities and high rises have started dotting the city's skyline. Rajarhat is also becoming lucrative investment destination among NRIs and HNIs as it offers world class facilities. Salt Lake is now witnessing stabilisation in rentals for short term.

Kolkata Property Prices -March 2010

Area / Residential / Commercial - How to Read ? [Park Street - Residential properties range between Rs 2200 to Rs 3800 and commercial between Rs 4500 to Rs 6000 per sft]
Park Street 2200 - 3800 4500 - 6000
Lower Circular 1800 - 2800 3000 - 5000
Belvedere 2500 - 3600 3000 - 5000
Ballygunge 2500 - 3800 3200 - 5500
SouthernAvenue 2400 - 3200 3500 - 5200
New Alipore 2000 - 2700 3000 - 4000
Santoshpur 1300 - 2100 2800 - 4200
Salt Lake 1600 - 2100 2500 - 4500
Shyambazar 1350 - 2000 2000 - 3500
Bahala 1200 - 1800 2000 - 3000
Lake Town 1300 - 1500 2000 - 2500
Gaira Garle Road 1000 - 1700 2000 - 3000
Naktala Road 1100 - 1400 1800 - 2200
Garcha Road 1600 - 1800 2000 - 2400
Prince Anwar Shah 1200 - 1800 2000 - 3000
Kaikhali VIP Road 800 - 1600 1800 - 3200
Dumdum Road 1800 - 2400 3000 - 7000
Dumdum Park 1900 - 2400 3000 – 4500

Godrej Garden City, Ahmedabad

A 10-year township project of >40msf development (over ~300 acres) off SG Highway, 20 minutes from the heart of the city. While it is largely a residential land development, a minimum of 70% will be residential (given the ambiguity about township rules in Gujarat). It is a JV with a local builder, which is to acquire all the land.

Management mentioned that the bulk of the 300 acres has been acquired. The project will be developed in phases: Ph-1 is to be launched in Mar10 – 1.0msf of residential at Rs2300-2400 /sf and 1,000sf unit size. Construction costs- contract with L&T at Rs 995/sf. Focus for next 2-3 years will only be on residential development.

Residential Price Rise Not Good

You've got to love this because the Real Estate Residential market has become so sensitive to price rise that volumes and registrations tell us the consumer behavior in this market. It is evident from what Anuj Puri of Jones Lang Lasalle Meghraj India said,

Residential volumes have come down by 25-30% Q/Q in 4Q09 given an increase in prices. Volume moderation has primarily happened in mid market (Rs 3-8MM), however, affordable (<>Rs 10MM) segments continue to do well. Going ahead, JLLM expects the volumes to stabilize at current levels, implying that the best may now be behind us.

It also tells us that Speculators are out of the Real Estate Market and the biggest non-essential player left is the Muscle Powered Goons :-)

The service tax burden (3.3% of sales value for new sales) is likely to be passed on to end users, thereby pushing up rents/prices.

Tier 2/3 cities seem to losing their sheen as incrementally office/retail demand is shifting to tier 1 cities (Hyderabad/Chennai) as rentals become relatively affordable in metros and tier 1 areas.

Apartments Costlier by 3.3% - Courtesy Budget

The imposition of a service tax on the buying of under-construction property will likely result in an additional cost of up to 3.3%, which we believe will be passed on to the buyer.

Budget documents indicate that government intends to recognize construction activity as a service provided by the developer to the buyer. We believe the imposition of service tax will be debated extensively and full clarity on the proposal will likely emerge in a couple of months.

The service tax is applicable for (1) construction of complex service under sub clause (zzzh) and (2) construction of ‘commercial or industrial construction service under sub clause (zzq). ‘Construction of complex’ means construction of a new residential complex (with more than 12 units) or completion and finishing services in relation to a residential complex.

Chennai + Kolkata + Hyderabad - Outlook

Here is the OUTLOOK for Residential Property Market in Chennai, Hyderabad and Kolkata.

Chennai 2,800 7,000 [Rs /sft] Decent market depth with multiple industries and emerging pockets of IT/ITeS as an alternative to Bangalore. Tends to be driven by the broader economy and the IT sector. Prices have stabilized and are likely to inch up by 2H10.

Hyderabad - 2,700 6,000 [Rs /sft] Came into prominence in the last decade as an alternative to Bangalore. Tends to lag Bangalore by 3-6 months. Prices are likely to remain weak, if not stable and start inching up by 2H10.

Kolkata 2500-5000 [ Rs /sft] Came into prominence in the last 3-5 years as an emerging IT/ITeS hub in East India. Currently under pressure due to some state-specific issues. Prices are likely to remain under pressure and may stabilize by mid-2010.

Delhi NCR + Pune Market Outlook

Here is an OUTLOOK for Delhi / NCR and Pune Residential Property Market.

New Delhi 8,000 25,000+ [Rs /sft] Capital of India and important economic center. Should see some improvement with a broader economic recovery. Prices likely to inch up through the year.

NCR - Gurgaon 2,700 6,000[Rs /sft] Important suburb of Delhi and large IT/ITeS center. Prices have stabilized and are likely to inch up by 2H10.

NCR - Noida 2,500 4,500 [Rs /sft] Likely to lag Gurgaon by 3-6 months. Prices have stabilized and are likely to inch up by 2H10.

Pune 2,800 7,000[ Rs /sft] Emerging as alternative to Mumbai and rise of the IT/ITeS center. Tends to lag Mumbai by 6-12 months. Prices have stabilized and are likely to inch up by 2H10.

Mumbai + Bangalore Outlook for next 12 Months

Here is OUTLOOK of Mumbai and Bangalore Residential Property Markets for the next 12 months.

Mumbai - Island City 15,000 - 40,000+ [Rs/ SFT] Typically, the first market to recover as the economy turns around and oligopolistic pricing. Given the rise in the last 6-8 months, prices in general are back to 2007 peak and may consolidate now. We may see a near-term correction of 5-10% but prices are likely to end the year higher than last year.

Mumbai Suburbs 5,000 15,000 [Rs / SFT] Tend to lag the island city by 6-12 months. Barring exceptions (in areas which saw feverish speculative activity), prices are unlikely to fall from here and may inch up through the year and end the year 5-15% higher than last year.

Bangalore - 2500 - 8,000 [ Rs / SFT] Even as it loses out to emerging competition from other cities, Bangalore remains the most important IT hub. Prices are likely to remain weak, if not stable and start inching up by 2H10.

Why we called it Bubble 2 years ago ?

We were shouting at the top of our voice how the Government had failed to handle the Real Estate Bubble in India. Tough measures and the much talked about Real Estate regulator was essential, but all in Vain.

The above Sales Data from DLF shows how Developers Sold Virtual Projects as if Sky was the limit. If it was a ONE-WAY traffic, then why did consumers stay away from BUYING during 2009, when prices had already fallen and Developers were desperate. ?

Bangalore Reality - Volumses Still Weak

This is what Ambit Equity Research has to say about Bangalore Real Estate,

Residential sale prices have increased by approximately10-20% from the trough. While the current sales volumes are extremely weak, we expect a gradual increase in the volumes with improving confidence in the IT/ITES sector and improvement in hiring.

Weak Volumes

We were surprised by the persistent weakness in sales volume based on our discussions with property brokers. According to the brokers if peak sales were 100 units/month, then the worst period was December 2008-January 2009 with zero unit sales, the current sales being approximately 10-20units/month.

If all the planned launches are achieved as per the developers' objective, we could, in that case, expect pressure on the prices.

HDFC Mutual Fund is betting big on B'lore based realty companies - Sobha, Brigade and Purvankara Projects. However, we are not sure if it is a bet on Residential projects or big deal like that of Brigade Enterprises Northstar Malleswaram Tower being sold to Oracle.

Prices to be Stable For Now

RBI has disallowed restructuring of real estate loans for real estate companies. JP Morgan tested cash flow assumptions for major real estate companies under our coverage to study the impact of the regulation.

According to JP Morgan, most listed companies seem to be comfortable but Industry is still not out of the woods. Overall system Debt/Equity at 0.8x is still relatively high and the industry cumulatively has repayments of over Rs180B (US$3.9B) in the next one year. Loan repayment issues are much worse in the unlisted space. This in part explains a scramble to raise money via listings.

This is because many developers [read unlisted] might be forced to start selling projects at lower prices to accelerate cash flows. However, longterm benefit comes in the form of industry consolidation and opportunity to gain land parcels at attractive rates from stressed developers.

Hence it is highly unlikely that prices will go up and is likely to be stable. Exception of CBD.

Budget Wishlist of Developers

Here is the Wish List of Property Developers of India in the forthcoming Union Budget.

• Doubling the deduction for home loan interest to Rs0.3m (vs. Rs0.15m) and principal repayment to Rs0.2m (vs. Rs0.1m).
• Extend IT exemptions for affordable housing under construction after Mar-08; also introduce restriction on value of apt, along with fixing eligibility ofbuyers;
  
• Relax ECB norms in dev of township by extending their deadline greater than Dec-10.
• Steps to implement uniform stamp duty rates across states (vs. current range of 5%-15%), along with rate reduction
• More measures taken to boost rental housing through a strong legal system and
  renewed focus on slum redevelopment is required
• Government should provide additional fiscal incentives to encourage green buildings

Its anybody's guess on what the Finance Ministry will do with the Current Account Deficit at new high and the ongoing problem of Inflation.

Residential recovery seems to be broadening

Study of recent reports from Cushman, Jones, etc indicates that prices are stabilizing across most micro markets in Q4, with demand now picking-up outside Mumbai and NCR markets (the first to recover)…though caution prevails over unreasonable hikes at this stage - an unreasonable hike could hamper demand and come in way of the recovery of housing segment.

Pune is seeing renewed demand; prices have risen across most pockets, with several locations clocking double-digit growth in Q4 in the mid-segment. Kolkata residential markets bounced back; Rajarhat and EM Bypass outperformed.

In Chennai and Bangalore, price decline arrest came through. With IT/ITes sector showing pick-up signs, employment sentiments turning positive and hiring stepping up, home buyers we are returning.

Commercial REalty - BKC in Mumbai grew 7% and Salt Lake in Kolkata grew 8% (low base)

Lavassa - Business Plan Revisited

Development area of 157msf, spread over 18,000 acres - Revised business plan of Lavasa now factors in development area of 18,000 acres, vs initial 13,500 acres. This entails development of 157msf, FSI of ~0.20x. The project now envisages 300,000 permanent residents and 2m visitors pa. Lavasa has a lake line length of 60 kms, and is spread across 100sq kms; equivalent to the size of Paris and one-fourth the size of Mumbai.

As per the Hill Station Regulations, Lavasa has been declared as a Hill Station over a proposed area of ~ 25,000 acres. The current business plan is for development of 18,000 acres out of the same and the company has purchased so far ~ 10,000 acres of land and further ~ 2,000 acres of land are in the agreement stage.

Development plan entails 4 periods, with Period 1 comprising of Dasve, Mugaon and Bhoini to be largely completed by FY13/14. Each of the periods would then have phase wise development. Dasve, the first town in this Period 1 will be ready by 2010.

Future launches to be primarily residential / commercial development; vs current largely comprising of institutional, hospitality and social infrastructure - Of the 157msf development plans, residential is expected to account for 64% and commercial (including offices, etc) to account for 20% while the balance 16% of the FSI development is towards hospitality, education and other social developments.