Residential Demand Remains Weak

Residential absorption (area sold) in key cities of India fell -22%YoY/ -9%QoQ in 3QFY15 (Prop Equity data). While the decline in absolute terms is still substantial, the pace of demand decline has moderated over the past four quarters. Residential new launches fell 59%YoY/42% QoQ in 3QFY15


Residential prices have been increasing despite weak volumes over the past 3-4 years. However, now different data points are suggesting a sharp deceleration in price rises. Residential prices grew just ~2% YoY in 3QFY15 – a sharp deceleration from the 12%-16% YoY increase seen over 2QFY12 -4QFY13.

Commercial absorption in key cities grew 11%YoY/ -12% QoQ in 3QFY15. 3QFY15 was fourth consecutive quarter in which commercial absorption grew. Commercial absorption grew 15%/6%/51% YoY
in 4QFY14/1QFY15/2QFY15. High inventory (~50 months of available supply) has kept rentals in check. Rentals are flat YoY. Commercial new launches fell 95%YoY/ 98%QoQ in 3QFY15.

Commercial property demand is growing again while residential demand destruction is inching closer to bottom. Demand for premium residential property in Mumbai and Gurgaon has picked up in 3QFY15. However, full recovery is some time away