In Mumbai, absorption has been declining since November 2010; absorption at 6msf is at its 25-month low.
New launches at 4.5msf less than half on YoY basis; however, launches can jump up sharply, if the approvals are back on track.
Even though new launches have reduced considerably, the reducing absorption level has kept inventory levels at 99msf. The inventory in months of sales is 16 doubled from 8 in September 2010. Though the inventory level has not increased since the past 20 months, considering large number of projects awaiting approvals, this figure can go up sharply. This is not a good sign for Mumbai property prices.
In nutshell inventory level is currently at a manageable level; however several projects nutshell, however, are awaiting approvals for launch. In case the approval process fastens, there will be a sudden rise in the inventory, which will push the developers to reduce the property prices. The savior is considerable improvement
in absorption, which seems unlikely at the current property price levels.
Pune
Absorption in Pune seems to follow absorption trend in Mumbai. Absorption in October 2011 is 3msf; at 23 months low.
New launches have declined considerably since beginning of the current calendar year. From the peak of 8msf in January, it has come down to as low as 2msf.
Inventory level declined from 61msf in January 2011 to 48msf in October 2011. This is not due to high demand but due of lack of new launches. The inventory in months of sales has started rising back. From the low of 11 in June, it has risen to 15.
In nutshell, Pune seems to follow Mumbai real estate market and we believe it is facing the same problem of possibility of sharp jump in new launches. The
market may witness property price correction unless developers time their launches in such a manner that not many properties hit the market at the same
time (this is unlikely scenario as scenario, most of the developers are keen to monetise their assets at the earliest).
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