Gurgaon - Greater Noida - Residential - Prices vs Sales

Gurgaon is in a similar situation as Mumbai with volumes, which were falling till Apr 2010, reviving to some extent in May 2010. Prices in Gurgaon have now moved up 20% y-y on average and volumes are not likely to show any significant upward movement in the medium term, in our view. Unsold stock with developers at 29mn sqft has come down 44% from the peak, while inventory is down to just 6 months of sales which is the lowest since this data is available. We believe that prices could move up further in Gurgaon unless launches pick up pace and we expect this to start from Sep 2010.

In the past 6 months, Noida and Greater Noida have recorded cumulative volumes in mn sqft, which are equal to cumulative volumes in the past two years. The number of units sold in the past 12 months (May 2009 to May 2010) is 4 times that of the units sold between Jul 2007 and May 2009. This large jump has not been led by any noticeable increase in employment activity in the region or any fall in pricing.

There is a lot of investor activity in this market, especially in projects on the Noida-Greater Noida expressway and the new Noida extension area. Large projects are being launched in Noida, leading to inventory levels moving up in absolute terms, although in terms of months of sales it is extremely low at 4 months. The actual inventory in the system though would be much higher because of the warehousing of these projects with the brokers. We believe that the model of sales to brokers is not a sustainable one and is likely to result in significantly large receivable issues for some of these developers going forward if the market takes a downturn.

Mumbai Property Price Vs Sales Trend

Residential volumes in Mumbai have moved down since Dec 2009, and in Apr 2010 volumes were down almost 35% before recovering somewhat in May 2010 to about 5mn sqft. Pricing increases of 35% y-y have stalled the recovery in volumes, although prices could still be considered reasonably healthy.

Inventory with developers has started moving up again as new launches have shown a sharp increase in the past two months with almost 14.5mn sqft of projects being launched. Inventory in terms of months of sales, at 9 months currently, has gone below the 2007 boom time levels, which we believe has led to the continued increase in prices.

We believe that volumes are unlikely to see an upside from current levels till prices move down, which may not happen until inventory increases significantly from here, especially in relation to demand. We believe that prices in Mumbai may stay high for another 9 to 12 months before increasing inventory starts pulling down prices.

Bangalore Residential Price Trends

Bangalore property market is showing steady signs of improvement on the back of a pick up in hiring activity and wage growth returning to the IT sector. Managements’ confidence in the physical market has markedly improved as seen in aggressive new launch plans for FY11 which are now being announced after a gap of almost 2-3 years. Most companies are launching projects that are 3-4x their historical sales levels in FY11 as unsold inventory levels have started to decline.

Our recent trip to Bangalore involving site visits and meetings with listed and unlisted developers/brokers/financiers shows that while the recovery is as yet nascent it is expected to pick up steam going into 2H. Transaction volumes in the residential segment have picked up noticeably over the last few quarters and the trend seems to be holding. Affordability both for residential and office segment remains healthy and this should propel volumes as demand returns.

Affordability in Bangalore’s residential market is healthy as pricing has not picked up materially, even as wage growth of 10-15% has started to return. Transaction volumes in the market have increased by 25% Y/Y over 2HFY10 and the trend seems to be holding. Our interactions with HFCs suggest that Bangalore is the only market which is showing growth in new customer acquisitions. Office rentals too seem to be bottoming out and leasing transaction is picking up driven by large MNCs.

Demand in Mumbai for Mid Priced Properties - Sarang Wadhawan

HDIL is one of the main Developers in the Island City of Mumbai. HDIL's promoter Sarang Wadhawan in an interview has the following views of the City's changing landscape.

Outlook on residential prices and volumes in the island city of Mumbai and in the suburbs of Mumbai?
Across Mumbai prices have gone up substantially in last 12 months. In most cases it has reached peak of 2007, while in some it has gone beyond 2007 levels. But the important differentiating factor has been that in last 1-1.5 years developers have been concentrating on launching affordable-mid income residential product catering to larger population. While in the earlier cycle most were concentrating on commercial and high end residential. So projects targeted at middle class and priced between Rs2500-Rs8000/sq ft in the suburbs continue to do well. If products are priced correctly, then demand is not an issue in suburb in Mumbai.

Which product types (residential- mass/ luxury, commercial and retail) are likely to see the most action in the next 12 months and the next 3-5 years?
In Mumbai before the crisis, the developers were largely concentrating on commercial, the revival of market happened through residential. We plan to focus on residential in Mumbai for next 12 -18 months. We will continue our focus on affordable/ mass housing where there is huge demand and continue to sell in volumes. There will be some luxury projects also but majority will be governed by affordable mid income housing. If real estate market starts improving further from here, over 3-5 years, developers will start shifting focus back on retail/ commercial. But for next 2-3 years Commercial will take a back seat as current supply is enough for 2-3 years.

On Airport slum rehab project
The construction work is on at 3 locations in Phase I. The work started at these locations between Apr 08-Oct 08 and in last 18-20 months almost 12mn sq ft of construction work has been done at these sites including various amenities like hospitals, primary schools, sewage treatment plants, police station etc. We were targeting movement of people to these sites from April 10, but BMC had asked us to delay the movement due to shortage of water. BMC will review the water situation in July 10. We are hopeful that due to good monsoon, we will get BMC approval in July so that people can be shifted from August/September.

What are current trends on TDR prices and volumes in Mumbai?
The TDRs are not linked to movement of the families but to construction of the rehab units. Currently TDR prices are above Rs3000/sq ft. We expect the prices to remain above Rs 3000 / sq ft in near future. We are targeting volume of 5-6mn sq ft in FY11.

Various Projects of HDIL:
We have 63mn sq ft under construction including the Airport project. ON the floor construction would comprise of ~30mn sq ft. Of this, residential would be around 8mn sq ft (75% of this is pre sold in range of Rs2500-8000/sq ft) and commercial 4mn sq ft( 20% pre leased). Remaining 18mn sq ft is slum rehab projects including Airport project.

Delhi NCR: Recent Launch Prices

Here is the Latest Delhi NCR Latest residential Property Launch Prices

Price in INR / SFT [Super Built-Up Area]

DLF Capital Greens III Delhi, Shivaji Marg 12,000
Ireo Victory Valley Gurgaon, Sector 67 5,250-5,650
Unitech South City - II (Independent Floors) Gurgaon 4,100-5,100
Unitech Vistas Gurgaon, Sector 70 3,200
Unitech Sunbreeze 2 Gurgaon, Sector 69 3,900
Ansal API Esencia Gurgaon, Sector 67
BPTP Park Serene Gurgaon, Sector 37D 3,200
Jaypee Greens Kensington Park Noida, Sector 133 2,800-3,000
Jaypee Greens Kasa Isles Noida, Sector 129 2,900
Paramount Industries Floraville Noida, Sector 137 2,600
Logix Group Blossom County Noida, Sector 137 2,775
Jaypee Greens Kensington Park Heights Noida, Sector 133 2,970
Gardenia India Ltd Gardenia Golf City Noida, Sector 75 3,050
Jaypee Greens Kingswood Oriental Noida, Sector 128 8,100
Jaypee Greens Kensington Boulevard Noida, Sector 131
Logix Group Paras Tierea Noida, Sector 137 2,750

Gurgaon Pricing and Noida Volumes Sizzling

Morgan in a Property Ground Survey of Delhi has the following report,

New launch momentum continues (35.5k in 1Q, the highest in the last nine quarters) and new sales were strong – 21.6 k units pre-sold. Gurgaon prices appear to be rising quickly and Noida volumes appear too good to sustain.

Three corners of Gurgaon offer “something for everyone” – Sectors 92-110 (IBREL, Raheja and Mahindra Lifespace launches – Rs2,200- 2,900 psf), Sector 66-70 (UT, Ansal, BPTP launches – Rs2,700-3,900 psf) and Phase V (DLF, Ireo – Rs5,000-8,000 psf). Volumes are healthy – new sales (4000 units = trailing four-quarter average) and new launches remain disciplined. However, primary market pricing (Ireo’s Arch, DLF Phase V, UT’s Sunbreaze) appear 25% higher in the last six to nine months.

New sales in 1Q was 3.5x Gurgaon (14k units); new launches were 6x Gurgaon (30k units); and available unsold stock (vacancies) was 2.2x Gurgaon (33k units). Intuitively, Noida should have all numbers lower than Gurgaon given that its stock of commercial properties (proxy on size of local economy) is less than one-third of Gurgaon’s. Our channel checks indicate that NCR has a fair component of broker-driven (underwritten) sales, which may be returned to developers if unsold. The silver lining in Noida is good pricing discipline so far (Rs2,900-3,300 psf).

Margins of Mahindra Life Space

Often as a Home Buyer you must have wondered what is the margin for Realty Developers. Here is authentic data from Edelweiss Capital on the margins of each project of Mahindra Lifepsaces.

Lower Parel likely to be over supply zone

Lower Parel has emerged as a major corporate destination in South Mumbai
after Nariman Point, particularly after seeing significant commercial development on defunct mill land. Many corporates have built corporate offices in the area while many more are in the pipeline. The area has also seen the development of many high-end residential projects, particularly in the last three to four years, targeting the elite South Mumbai buyers.

Going forward we believe that 1) Lower Parel is likely to see supply of over 10 msf in next 3-4 years thus making it an over supply zone 2) Prices in this zone is likely to correct taking into consideration above supply, supply of NTC mills, not yet factored in(3) Surroundings areas like Worli, Prabhadevi, Mahalaxmi etc will be buyers first choice taking into consideration better infrastructure facilities. We believe new launches from DLF, Lodha Raheja has to be at decent price (Rs 15,000-20,000 psf) to bring absorption in Lower Parel.

Big players like DLF and Lodha are expected to launch high-end projects in Lower Parel – in our opinion, to drive absorption levels, it is critical that these projects are rightly priced. We believe that prices at Lower Parel should be discounted to Worli, Mahalaxmi and Prabhadevi due to quality of infrastructure facilities and congestion levels. Lower Parel may also see higher absorption if lower unit size of 1000-1500sq ft is introduced as against the current average unit size of 2500 sq ft.