Property Absorption Low + Prices Rise

The weak trend in property volumes continued in Apr’12 with volumes declining 32% YoY, a trend seen for the last eight months, indicating no sign of an improvement in demand. Six of the seven major cities recorded a YoY decline in volumes viz., MMR (-50% YoY), Gurgaon (-45% YoY), Bangalore (-12% YoY), Chennai (-11% YoY), Hyderabad (-34% YoY) and Pune (-32% YoY). Kolkata was the only city with a marginal (+1% YoY) improvement in volumes. MMR and Gurgaon continue to remain the weakest markets while volumes in Bangalore and Chennai appear to be relatively holding up better. We maintain our view that the weakness in volumes will continue throughout CY12 unless property prices correct meaningfully from the current levels.

The Following Chart Shows Average Property Price Curve Vs Absorption in India.
Price Rise Continues
Average property prices have continued to see a YoY increase across most property markets despite the slowdown in volumes, which is resulting in a further weakening of demand. Gurgaon has seen the most price appreciation (7% MoM and 32% YoY) consequently leading to a worsening demand environment today. Bangalore (+13% YoY, +1% MoM), Chennai (+9% YoY, +2% MoM) and Pune (+16% YoY, +1% MoM) have also seen a double-digit YoY increase in prices although the pace of appreciation appears to be moderating in the recent months.