Chennai Hisotrical Demand vs Supply in Residential

Absorption activity in Chennai has seem some moderation; however overall trends remain healthy. Launch activity also has increased again and most southern developers (PEPl/SOBHA/PVKP) are looking to expand their presence in Chennai via JDA tie ups or new land acquisition. This given strong response to their launches last year. Unsold inventory has remained largely stable in the market (at 14 months) as demand is largely in balance with the supply. Pricing has witnessed marginal appreciation over the last few months. There are large project deliveries coming up in the market in CY13 from DLF, Puravankara, etc

Bangalore Residentia Demand Vs Supply - Historical Data

Bangalore continues to witness steady absorption trends and high launch activity. This is seen in the strong operating trends reported by Bangalore based developers (Sobha/PEPL/PVKP). Additional launch pipeline also remains strong going into CY13 which should keep the absorption trends healthy. New launches last month include Purva Sunflower (Magadi Road at Rs6.5K) and Sunworth (Kengeri) and Sobha’s launch in Rajaji Nagar (at Rs10.5Kpsf). Prices in the new launches however have been fairly high. Overall prices in the market have appreciated meaningfully in the market, which could constrain affordability ahead. Unsold inventory has remained largely stable at 18 months as strong absorption is also accompanied with big launches.

Gurgaon Property Supply Absorption

Launch activity has picked up meaningfully in Gurgaon over the last 2-3 months and the trend should continue. Key launches in the pipeline include – DLF’s luxury launches around the Golf Course (5msf+), IBREL’s launch on the Dwarka Expressway, and additional launches by GPL. Absorption trends have also been improved as evinced in good response to recent launches (Sobha/GPL/DLF/Tata Housing’s projects). Pricing in the market has remained strong especially in New Gurgaon market. Recent launch by DLF in the micro market has been done at Rs10K psf levels (Ultima). Months of unsold inventory has come down to 10 months vs. 13months in Sep-Q with the pick up in absorption. Gurgoan market is expected to see large deliveries in CY13.

Gurgaon Supply and Absorption Chart as shown below

Noida Property Supply vs Absorption Levels

Absorption levels in Noida/Greater Noida have picked up meaningfully over the last 2 quarters. Launch/sales activity has shifted to Greater Noida. This comes on the back of notification of Greater Noida new master plan and launch of Yamuna Expressway. Unitech’s launches seem to have done well in Noida, while Jaypee and other local developers have registered good pre sales in expressway/Greater Noida launches. Overall absorption run rate is trending back to 2011 levels, after a lull in CY12. Prices in Greater Noida / sectors surrounding have seen a sharp appreciation. Unsold inventory has come down meaningfully in the market. Deliveries in the market are about a year away, which will be the true test of the market.

Key Property Projects in Tier - I Cities

Key Property Project Launches across Tier-I Cities and their Prices in Indian Rupees as shown below in the table

State of Realty in major Indian Markets

RBI cut the repo rate by 25bps and left the CRR unchanged on 19/03/13. Bankers stated that this will not induce them to cut mortgage rates. Both consumers and realtors were disappointed with RBI’s hawkish view on future cuts.

Mumbai property market is immune to mortgage rate movements. Once again, we reiterate our belief that Mumbai is gearing up for a price correction (15-20%) or time correction (stable prices for next 2/3 years), as projects receive approvals and get launched through CY13. More recently, the market has witnessed signs of weakness, with more realtors announcing benefit schemes, such as the 20:80 scheme (equivalent to 8-10% discount), floor rise waivers, etc.

Gurgaon will continue to surprise positively on new sales momentum in CY13 as well as the high presence of investors and end-users from five neighboring states. Prices, however, are expected to remain under pressure in locations outside prime areas, such as Golf Course road

Bangalore and Pune residential market is the most correlated to mortgage rates among tier I cities. If mortgage rates don’t fall below 10% in 2013, we expect annual residential sales to remain flat YoY.

Office & Retail segment – Potential recovery in 2H13
Enquiries for office properties have increased significantly. Further, a change in trend that could be
observed is that companies are actually buying land instead of taking it on lease. About 40% of the demand
is from the IT sector, 30% from manufacturing, 10% from BFSI and 20% from other services.

Rents likely to trend up in the near term. He expects absorption to increase for almost all cities by 10%.
Office rentals in Bengaluru are close to their previous peak, whereas in Mumbai they are still off by 35-40%
compared to their previous peak

Residential Comprises 60% of Indian Property Market

The residential sector will continue to account for more than 60% of Indian property market in terms of construction activity, sales & revenues and investments. Anuj believes there is perennial need for residential development in India within the sweet spot of Rs3mn to Rs10mn per apartment (up to Rs20mn for Mumbai alone). All supply within this price bracket has seen robust sales.

 Mumbai - Analyst foresees an oversupply in resi space in Central Mumbai as more than 5,000-6,000 units (starting price of USD750k/unit) have been launched with promised delivery over next 4-5 years

Gurgaon market has puzzled all with its relentless robustness in the residential sector. This can be attributed  to rising aspirations of property ownership from 5 neighboring states for educational & medical reasons, significant presence of speculative monies, improving infra and affordable pricing (units < Rs12mn).

Godrej BKC Selling Price Rs 25000 / SFT - Prestigious Commercial

Godrej Properties Ltd [GPL] the launch of Godrej BKC, a prestigious commercial project in BKC – a rapidly developing business district located in Central Mumbai. The project comprises of 1.3msf of saleable area (2.5-acre plot area) and would entail strata sale. It has been launched at ~Rs25,000psf (base selling price) and is expected to be completed in three years. GPL expects a good response to the project once demand for office space revives in Mumbai and estimates revenue of Rs35-40bn from it. Skidmore, Owings and Merill (SOM) are the lead architects for the project, while Larsen & Toubro will carry out construction.

Godrej BKC is to be developed by an SPV – a 50:50 (profit share) JV between GPL and Jet Airways. Jet Airways bought the project plot from MMRDA in 2006 for Rs8.3bn and the development SPV was formed in August 2011. The JV took over Rs3.6bn of debt obligation from Jet (toward land purchase) and
paid an additional Rs1.35bn to Jet.

GPL can sell the project at an Average Selling Price of Rs30,000/sft over the next three years and project cost of ~Rs11,000/sft