Bangalore Steady Sales + Gurgaon Lowest Unsold Inventory

In Gurgaon Micro Market, Quarterly demand (sales) has been ahead or in-line with supply (new launches) since the last 12 quarters with the exception of Q1CY2011. This clearly indicates robust demand for residential units in the market. We foresee this trend to continue led by large and rising migrant population aspiring to live and work in Gurgaon. In terms of affordability, Gurgaon continues to remain at the cusp of affordability (defined as monthly mortgage installment / monthly income) which has supported resilience in demand.

Absorption rate was flat in 2Q led by slowdown in new launches (supply). Unsold inventory tapered further in 2Q as demand surpassed supply yet again in Gurgaon. The unsold inventory (represented in # of quarters required to exhaust unsold inventory) has been less than 4 quarters since 1QCY10, which is the lowest compared to other cities across the country.

Sales volume in Bangalore remained steady despite significant reduction in new launches. We believe the same is due to affordable prices which have historically seen annual increments in single digits over last 8-10 years. This particular nature of Bangalore has attracted more end-users and long-term investors over speculative investors as upside from housing projects has remained limited.

Unsold inventory in Bangalore city reduced primarily led by steady sales volume and 30% dip in new project launches. We believe Bangalore developers recognize rise in unsold inventory and some plan to launch new projects once the unsold inventory figure attains more comfortable levels.

Mumbai - Upward Pricing for Premium Properties

Recent new launches in Mumbai MRDA include – Godrej Chembur (BSP - Rs16k psf), Wadhwa Dadar (Rs25.5k psf), Bombay Dyeing Dadar ICC1/2 (roughly Rs28k psf), Lodha Dioro Wadala (Rs15k psf), Godrej Platinum Vikhroli (Rs12k psf) and IBREL Worli Blu
(Rs50k psf).

To us, most of these projects appear to be priced at a meaningful premium (15-40%) to the neighborhood and are, therefore, losing investor demand. Project specifications (large/mixed format, fit outs, common area, amenities) are improving sharply to compare with those in the more advanced cities in the world. These Developers continue to prefer margins (pricing) at the cost of asset turnover (volumes).

Mumbai Residential - Lower Prices for New Projects

Here are the views of Mr. Ramesh Nair, Jones Lang LaSalle India on the Mumbai Residential Property Market.

He expects turnaround in Mumbai residential segment in next six months as developers launch new projects at lower prices. The key reason for prices holding up was due to sharp drop of over 50% in new launches which neutralized the 30% drop in absorption. However, with new DCR (Development control regulations) in place, launches are picking pace and should lead to improved sales volume.

The affordability in Mumbai market can improve only if infrastructure projects are implemented opening up new land supply. He believes redevelopment and slum rehab will provide future land supply (up to ~13,000 acres) in Mumbai island city.