Bangalore Vs Gurgaon Vs Noida - Apartment Sales Trend

Absorption rate in Bangalore stooped starting in 1QCY14 on the back of aggressive launches and stable sales in CY14. Despite weakening, absorption rate in Bangalore remained the strongest among all cities discussed in this report, primarily due to its affordability ensuring high end-user demand. Once again,
most new project launches in 3QCY14 were by the top 10 developers. We expect CY14 to witness quality launches (similar to 2013) at attractive prices (under Rs6,000 per sq ft) to sustain current absorption run-rate of ~10%.

We continue to reiterate our belief that Bangalore residential market’s robustness is primarily due to its affordability attracting end-users and investors. The majority of areas in Bangalore are priced at ~Rs4,500 - 5,500 per sq ft equating to USD90k- 175k per unit. We strongly reiterate our view that residential products within the sweet spot of USD75k-200k sell the most in India.

We believe the two key risks we have been highlighting for Gurgaon have played out – 1) rising prices amidst slowing income growth and 2) stock dump by investors in projects nearing completion (launched in 2009-10). We foresee the following events to occur before any meaningful resurrection in sales and cash
flows – 1) a notable rise in new launches with freebies and discount schemes and 2) a reduction in investor inventory in the secondary market. Although developers hinted at a notable pick-up in enquiries in 3QCY14, our channel checks confirmed no positive trends in conversions or sales.

Although Gurgaon’s unsold inventory (in absolute terms) is the lowest in the country, it has seen an exponential rise over the last 3 quarters indicating a significant slowdown in sales. Quarterly sales (demand) have fallen from an average of ~6,000 units in CY12 to ~2,000 units in CY14. Consensus strategy
among developers seems to be slowdown launches against price moderation

Looking at the recent trend of a slowdown in launches in Noida, we believe unsold inventory has peaked at ~100,000 units. Although this sounds positive, the absolute number of 100,000 unsold units is huge. Also, the # of qtrs required to exhaust this unsold inventory has been rising since last 5 qtrs adding to the worry. This has applied pressure on any further price revision upwards. Our onthe- ground sources say end-user demand remains weak in Noida whereas investor demand has picked up given attractive prices / discounts / freebies offered by well-known developers to clear unsold inventory/