Market slowing down, managing repayments and construction the key

The Real Estate market has slowed after showing steady trends for two years on volumes. In Bangalore too, local issues drove negative sentiment, but organized developers held on to their volumes. Gurgaon remains an aberration for large developers as well - sales remain weak. We expect launches to drop further as developers look to sell from ongoing projects. We don’t expect new launches form listed developers in Mumbai and Gurgaon over next two-three quarters, while Bangalore might report launches in certain pockets.

Any potential fall in pricing is unlikely to boost volumes as sales usually don’t pick up in a falling price environment. But we don’t expect a major correction in pricing in the western and southern metros as prices have remained stagnant for the past three years and affordability has been improving in certain markets. Transaction prices are usually 80-85% of the quoted prices for the past three years and could see some discounts / offers.

Slower volumes worry us more than drop in pricing, as lower volumes will reflect in lower collections resulting in slowing construction and servicing of liabilities. Market-wide volumes could correct over the next 2-3 quarters, by 10-30%. This will delay projects of several unorganized developers further, as availability of credit is limited to organized developers.