In Gurgaon Micro Market, Quarterly demand (sales) has been ahead or in-line with supply (new launches) since the last 12 quarters with the exception of Q1CY2011. This clearly indicates robust demand for residential units in the market. We foresee this trend to continue led by large and rising migrant population aspiring to live and work in Gurgaon. In terms of affordability, Gurgaon continues to remain at the cusp of affordability (defined as monthly mortgage installment / monthly income) which has supported resilience in demand.
Absorption rate was flat in 2Q led by slowdown in new launches (supply). Unsold inventory tapered further in 2Q as demand surpassed supply yet again in Gurgaon. The unsold inventory (represented in # of quarters required to exhaust unsold inventory) has been less than 4 quarters since 1QCY10, which is the lowest compared to other cities across the country.
Sales volume in Bangalore remained steady despite significant reduction in new launches. We believe the same is due to affordable prices which have historically seen annual increments in single digits over last 8-10 years. This particular nature of Bangalore has attracted more end-users and long-term investors over speculative investors as upside from housing projects has remained limited.
Unsold inventory in Bangalore city reduced primarily led by steady sales volume and 30% dip in new project launches. We believe Bangalore developers recognize rise in unsold inventory and some plan to launch new projects once the unsold inventory figure attains more comfortable levels.
Tuesday, July 10, 2012
Monday, July 09, 2012
Mumbai - Upward Pricing for Premium Properties
Recent new launches in Mumbai MRDA include – Godrej Chembur (BSP - Rs16k psf), Wadhwa Dadar (Rs25.5k psf), Bombay Dyeing Dadar ICC1/2 (roughly Rs28k psf), Lodha Dioro Wadala (Rs15k psf), Godrej Platinum Vikhroli (Rs12k psf) and IBREL Worli Blu
(Rs50k psf).
To us, most of these projects appear to be priced at a meaningful premium (15-40%) to the neighborhood and are, therefore, losing investor demand. Project specifications (large/mixed format, fit outs, common area, amenities) are improving sharply to compare with those in the more advanced cities in the world. These Developers continue to prefer margins (pricing) at the cost of asset turnover (volumes).
(Rs50k psf).
To us, most of these projects appear to be priced at a meaningful premium (15-40%) to the neighborhood and are, therefore, losing investor demand. Project specifications (large/mixed format, fit outs, common area, amenities) are improving sharply to compare with those in the more advanced cities in the world. These Developers continue to prefer margins (pricing) at the cost of asset turnover (volumes).
Monday, July 02, 2012
Mumbai Residential - Lower Prices for New Projects
Here are the views of Mr. Ramesh Nair, Jones Lang LaSalle India on the Mumbai Residential Property Market.
He expects turnaround in Mumbai residential segment in next six months as developers launch new projects at lower prices. The key reason for prices holding up was due to sharp drop of over 50% in new launches which neutralized the 30% drop in absorption. However, with new DCR (Development control regulations) in place, launches are picking pace and should lead to improved sales volume.
The affordability in Mumbai market can improve only if infrastructure projects are implemented opening up new land supply. He believes redevelopment and slum rehab will provide future land supply (up to ~13,000 acres) in Mumbai island city.
He expects turnaround in Mumbai residential segment in next six months as developers launch new projects at lower prices. The key reason for prices holding up was due to sharp drop of over 50% in new launches which neutralized the 30% drop in absorption. However, with new DCR (Development control regulations) in place, launches are picking pace and should lead to improved sales volume.
The affordability in Mumbai market can improve only if infrastructure projects are implemented opening up new land supply. He believes redevelopment and slum rehab will provide future land supply (up to ~13,000 acres) in Mumbai island city.
Wednesday, June 27, 2012
Noida + Gurgaon - Latest Pricing of Residential Projects
Yesterday, we have cautioned our readers about the Developer-Broker-Investor nexus of Real Estate in Delhi NCR.
The Current Residential Property Prices in Noida and Gurgaon for the following projects Amrapali, Zodiac, RG Residency, Unihomes, The Residences, Golf & Country Club- Amber, Amrapali Sapphire, Jaypee Greens - Kalypso Court, Imperial Court Pavillion Heights, Knights Court, Kensington Boulevard, Grand Isles, Krescent Homes, Kosmos Noida, Atharva, International city, Paradiso, Primus, Petioles, Vistas, Exquisite and Alder are as follows.
The Current Residential Property Prices in Noida and Gurgaon for the following projects Amrapali, Zodiac, RG Residency, Unihomes, The Residences, Golf & Country Club- Amber, Amrapali Sapphire, Jaypee Greens - Kalypso Court, Imperial Court Pavillion Heights, Knights Court, Kensington Boulevard, Grand Isles, Krescent Homes, Kosmos Noida, Atharva, International city, Paradiso, Primus, Petioles, Vistas, Exquisite and Alder are as follows.
Tuesday, June 26, 2012
Delhi NCR Property Market Driven by Broker - Investor Nexus
NCR Realty market is a Broker-Investor driven market, especially for new projects with price increases driven by this model rather than robust end-user demand.
Modus Operandi of NCR Realty Market - The syndicate of brokers and investors continues to be the leading cause for developers in NCR touting high booking figures a few days after a project launch. The game plan here is for brokers to submit the booking amount on behalf of their investor clients, wait for the developers to increase prices by 10% in a year's time, by which time construction activity becomes visible on the project and the lock-in period expires off-load the booked apartment to another category of investor, who is willing to invest more for another >20% return, and move the original amount plus the profit to another newly launched project.
Prices have to continually increase for this model to be viable and for investors to remain interested and, in our view, this is the reason why we have seen a sharp ~25% increase in prices in Gurgaon in the past 12-18 months despite a slowing economy and high interest rates.
The developer also has to be careful not to start aggressive construction on the project before most investors have offloaded their holdings, otherwise the investor may balk at putting up more money, which could hurt the project cash flows.
This model is akin to riding a tiger where getting off may mean being swallowed and, we think, we are reaching close to that point. If developers fail to increase prices from hereon, their sales from new launches will slow down as investors will be uninterested and if they increase prices from these already unaffordable levels the end-users / later stage investors will refuse to purchase.
Thus Be EXTRA CAUTIOUS While BUYING Property in Delhi NCR especially with the following Builders who are in this Broker-Developer-Investor Nexus Amrapali, RG-Group, Unitech Jaypee, Raheja, Sobha, Chintels, ATS, DLF and SARE.
Modus Operandi of NCR Realty Market - The syndicate of brokers and investors continues to be the leading cause for developers in NCR touting high booking figures a few days after a project launch. The game plan here is for brokers to submit the booking amount on behalf of their investor clients, wait for the developers to increase prices by 10% in a year's time, by which time construction activity becomes visible on the project and the lock-in period expires off-load the booked apartment to another category of investor, who is willing to invest more for another >20% return, and move the original amount plus the profit to another newly launched project.
Prices have to continually increase for this model to be viable and for investors to remain interested and, in our view, this is the reason why we have seen a sharp ~25% increase in prices in Gurgaon in the past 12-18 months despite a slowing economy and high interest rates.
The developer also has to be careful not to start aggressive construction on the project before most investors have offloaded their holdings, otherwise the investor may balk at putting up more money, which could hurt the project cash flows.
This model is akin to riding a tiger where getting off may mean being swallowed and, we think, we are reaching close to that point. If developers fail to increase prices from hereon, their sales from new launches will slow down as investors will be uninterested and if they increase prices from these already unaffordable levels the end-users / later stage investors will refuse to purchase.
Thus Be EXTRA CAUTIOUS While BUYING Property in Delhi NCR especially with the following Builders who are in this Broker-Developer-Investor Nexus Amrapali, RG-Group, Unitech Jaypee, Raheja, Sobha, Chintels, ATS, DLF and SARE.
Property Absorption Low + Prices Rise
The weak trend in property volumes continued in Apr’12 with volumes declining 32% YoY, a trend seen for the last eight months, indicating no sign of an improvement in demand. Six of the seven major cities recorded a YoY decline in volumes viz., MMR (-50% YoY), Gurgaon (-45% YoY), Bangalore (-12% YoY), Chennai (-11% YoY), Hyderabad (-34% YoY) and Pune (-32% YoY). Kolkata was the only city with a marginal (+1% YoY) improvement in volumes. MMR and Gurgaon continue to remain the weakest markets while volumes in Bangalore and Chennai appear to be relatively holding up better. We maintain our view that the weakness in volumes will continue throughout CY12 unless property prices correct meaningfully from the current levels.
The Following Chart Shows Average Property Price Curve Vs Absorption in India.
Price Rise Continues
Average property prices have continued to see a YoY increase across most property markets despite the slowdown in volumes, which is resulting in a further weakening of demand. Gurgaon has seen the most price appreciation (7% MoM and 32% YoY) consequently leading to a worsening demand environment today. Bangalore (+13% YoY, +1% MoM), Chennai (+9% YoY, +2% MoM) and Pune (+16% YoY, +1% MoM) have also seen a double-digit YoY increase in prices although the pace of appreciation appears to be moderating in the recent months.
The Following Chart Shows Average Property Price Curve Vs Absorption in India.
Price Rise ContinuesAverage property prices have continued to see a YoY increase across most property markets despite the slowdown in volumes, which is resulting in a further weakening of demand. Gurgaon has seen the most price appreciation (7% MoM and 32% YoY) consequently leading to a worsening demand environment today. Bangalore (+13% YoY, +1% MoM), Chennai (+9% YoY, +2% MoM) and Pune (+16% YoY, +1% MoM) have also seen a double-digit YoY increase in prices although the pace of appreciation appears to be moderating in the recent months.
Thursday, June 14, 2012
Mumbai property registrations show recovery signs
Property registrations in Greater Mumbai declined ~10% YoY and ~3% QoQ in the quarter. However, QoQ decline is attributed to the higher registrations in Q3FY12 due to the December effect.
Property registrations for March and April were 5830 and 5150, respectively, which are well above the Jan‐Feb numbers of ~4100‐4300, indicating an uptrend in registrations. The Maharashtra government’s recent decision to introduce the amended Development Control Regulations (DCR) for Mumbai city/suburbs is a significant positive. We believe this development will spur new launches in the city which had been on hold for over a year. We expect new launches to be attractively priced (~5‐10% lower than prevailing rates), which along with softer interest rates, will drive volumes in the city.
Property registrations for March and April were 5830 and 5150, respectively, which are well above the Jan‐Feb numbers of ~4100‐4300, indicating an uptrend in registrations. The Maharashtra government’s recent decision to introduce the amended Development Control Regulations (DCR) for Mumbai city/suburbs is a significant positive. We believe this development will spur new launches in the city which had been on hold for over a year. We expect new launches to be attractively priced (~5‐10% lower than prevailing rates), which along with softer interest rates, will drive volumes in the city.
Tuesday, June 12, 2012
Residential Property Trends for 8 Years - Mumbai Vs Bangalore
India witnessed high volitality in Property Prices in the last 8 years. Breaking this time period (2004 – 2012) in four phases will help in understanding these movements better. Hence we have segregated this period into four phases.
Phase I (2004 to mid 2007): In just three years, property prices along with absorption increased considerably. Though the data for this period is not available, as per our discussion with industry experts, the price rise was very sharp during this period.
Phase II (Mid 2007 to end of 2008): In mid 2007, the absorption started reducing on the back of some sharp up move in property prices. The downward trend continued for 15 - 16 months
Phase III (End of 2008 to end of 2010): Post 2008, the prices started cooling off and resulted in increase in absorption. This continued for almost 2 years (till end of 2010). Till this time, scenario was similar across all major cities in the country. However; post 2010, two of the major real estate markets i.e. Bengaluru and Mumbai started showing opposite trends.
Phase IV (End of 2010 to mid 2012): While the prices continued to rise sharply in Mumbai, Bengaluru witnessed stable pricing levels. This helped Bengaluru to enjoy sustainable absorption against Mumbai, which witnessed considerable reduction in the absorption levels. This continued for almost 13 – 14 months and during this period, Bengaluru witnessed considerably increase in the area launched while Mumbai, coupled with lack of government approvals, witnessed dearth.
Phase I (2004 to mid 2007): In just three years, property prices along with absorption increased considerably. Though the data for this period is not available, as per our discussion with industry experts, the price rise was very sharp during this period.
Phase II (Mid 2007 to end of 2008): In mid 2007, the absorption started reducing on the back of some sharp up move in property prices. The downward trend continued for 15 - 16 months
Phase III (End of 2008 to end of 2010): Post 2008, the prices started cooling off and resulted in increase in absorption. This continued for almost 2 years (till end of 2010). Till this time, scenario was similar across all major cities in the country. However; post 2010, two of the major real estate markets i.e. Bengaluru and Mumbai started showing opposite trends.
Phase IV (End of 2010 to mid 2012): While the prices continued to rise sharply in Mumbai, Bengaluru witnessed stable pricing levels. This helped Bengaluru to enjoy sustainable absorption against Mumbai, which witnessed considerable reduction in the absorption levels. This continued for almost 13 – 14 months and during this period, Bengaluru witnessed considerably increase in the area launched while Mumbai, coupled with lack of government approvals, witnessed dearth.
Subscribe to:
Posts (Atom)