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.
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