Gurgaon + Noida + Chennai Property Markets Lead in Recovery

A comparison of volumes during the peak 2007 and end of 2010 data suggests that Gurgaon, Noida / Greater Noida and Chennai property Markets recovered to cross the previous peak volumes consistently for the last 6 months while the rest of India exhibited mixed trends.

Noida / Greater Noida - Sold 2 Mn SFT / Month in 2007. The figure went up as high as 10 Mn SFT / Month in the last 6 months and has started to cool off with rising interest rates.

Gurgaon - From a lull in mid-CY10, demand for residential property in Gurgaon has recovered smartly. Price correction may still be staved off for another 4-6 months, post which prices may correct by 15%, we believe. The key here would be to watch for supply from investors in the secondary market, as this could lead to an earlier price correction.

Chennai - Volumes in Chennai are currently at their best ever in history. We believe Chennai volumes should remain strong vs. FY09 levels, driven by the IT industry and good affordability in the suburbs. Inventory levels though remain a worry, in our opinion.

Bangalore - The Bangalore residential market seems to have entered a rut with volumes unable to break out of the 3-4 mn sqft range. An interesting feature is that the size of homes sold has come down in the past 3-4 months suggesting that buyers in Bangalore are downtrading in the face of a 150bp increase in interest rates and a 15% rise in prices. Affordability in Bangalore is little high and hence buyers are not willing to stretch themselves with the Poorest City Infrastructure compared to all other Tier-I cities in India.

Hyderabad - Hyderabad continues its poor performance as the uncertain political situation and the consequent lack of clarity on Hyderabad’s status as the capital city seem to have led to buyers staying away.

Kolkata - Kolkata witnessed a good demand environment in 2H CY10, with volumes consistently above 1mn sqft. The unsold stock with developers has come off significantly over the last 2.5 years

Mumbai Metro Region - Demand for residential property in MMR slowed down considerably since the early part of the year. While the slowdown in square feet terms looks muted, in terms of units sold at 3,101, Dec 2010 was the second-slowest month since Dec 2008 (2,925). This is because sales of larger-sized apartments (premium homes) are continuing; the slowdown seems to be more in mid-segment homes due to rising interest rates.