Residential markets ended 2013 on a sluggish note with the festive season remaining fairly quiet due to the launch/ approval delays and weak macro. We expect the residential markets to see an improvement in 2014 driven by the pick-up in demand in the suburban markets. Some price softening, lower mortgage rate and reduction in unit sizes (already being witnessed in 1BHK launches in Mumbai) should bring improvement in the affordability levels. However, we think recovery is likely to be more 2H weighted and 1H may remain quiet until the elections.
We have seen some evidence of price discounting in the select markets of Mumbai and Gurgaon in terms of subvention schemes and lower prices in secondary markets. Prices in the Bangalore market, however, have continued to firm up; while Chennai has been largely stable. Mortgage rates have also come down by 25bps given the competition between banks / HFCs to build out low risk secured portfolio.
Comparison of Residential Property Sales Across India in 2011, 2012, 2013
In terms of markets, Mumbai continued to witness sluggish trends; while Gurgaon saw a sharp decline in volumes in 2HCY13 and trend is likely to continue near term. Bangalore witnessed stable trends (absorption flat Y/Y) as also evinced in strong presales performance of key Bangalore developers; while G Noida registered a sharp revival off a low base post the notification of the G Noida master plan and commencement of the Yamuna expressway.
Mumbai is the key candidate for a turnaround in CY14. Mumbai market has been witnessing sluggish trends over the last 3 years due to regulatory changes, approval/launch delays and high prices. Gurgaon has seen a significant moderation in absorption / launch activity in 2HCY13 and we expect the market to remain muted in CY14. After being an outperformer market in CY12 and CY13, we expect Bangalore to witness some moderation going into CY14.
