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Festival season keeps volumes stable; expect slowdown ahead
Although volumes on a pan-India level (ex-Mumbai) were healthy across cities in
Q4CY10, rising property prices and hardening mortgage rates combined with
slowdown in investor demand will lead to volumes declining across most cities in
H1CY11. Volumes in Mumbai are down 50% below peak levels and we believe a
similar trend (though less acute) may play out in NCR over H1CY11. Bengaluru
and Chennai markets have recovered smartly in CY10 on the back of end-user
demand from the IT/ITES sector and a stable pricing environment. We expect
Bengaluru volumes to remain stable, while sustainability of volumes in Chennai
is a key monitorable.
We have maintained a view of prices in Mumbai correcting by ~15% in CY11 on
account of high prices/dampened buyer sentiment. In this regard, our channel
checks indicate initial signs of prices softening in Central Mumbai. However, we
believe the correction of ~15% is limited to premium high-rise projects in initial
stages of construction and does not represent a broad-based correction in Mumbai.
NCR site visits indicate moderate pick up in execution
We visited over 20 projects in NCR to examine execution across projects in the
region and observed moderate progress in execution across projects in the
region compared to 12 months ago (Q1CY10). However, within NCR, execution
across a number of new launches in Noida Extension in CY10 has been slow,
which we believe can be attributed to higher proportion of investor/broker sales
in that micro-market. In terms of specific developers, we observed reasonable
progress in construction activity across projects of DLF, Unitech, and the Jaypee
Group where construction had commenced in FY10.
Outlook: Headwinds to weigh on near-term performance
We expect the realty sector to continue the underperform the broader indices in
the near-term on the back of headwinds in the form of tight liquidity, high
property prices and corporate governance issues. However, post the sharp
correction in stock prices, we recommend adding weight in select names. Among
large caps, we prefer DLF while among mid-caps, we prefer companies with
front-ended NAV such as Phoenix Mills and Brigade Enterprises.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Festival season keeps volumes stable; expect slowdown ahead
Although volumes on a pan-India level (ex-Mumbai) were healthy across cities in
Q4CY10, rising property prices and hardening mortgage rates combined with
slowdown in investor demand will lead to volumes declining across most cities in
H1CY11. Volumes in Mumbai are down 50% below peak levels and we believe a
similar trend (though less acute) may play out in NCR over H1CY11. Bengaluru
and Chennai markets have recovered smartly in CY10 on the back of end-user
demand from the IT/ITES sector and a stable pricing environment. We expect
Bengaluru volumes to remain stable, while sustainability of volumes in Chennai
is a key monitorable.
We have maintained a view of prices in Mumbai correcting by ~15% in CY11 on
account of high prices/dampened buyer sentiment. In this regard, our channel
checks indicate initial signs of prices softening in Central Mumbai. However, we
believe the correction of ~15% is limited to premium high-rise projects in initial
stages of construction and does not represent a broad-based correction in Mumbai.
NCR site visits indicate moderate pick up in execution
We visited over 20 projects in NCR to examine execution across projects in the
region and observed moderate progress in execution across projects in the
region compared to 12 months ago (Q1CY10). However, within NCR, execution
across a number of new launches in Noida Extension in CY10 has been slow,
which we believe can be attributed to higher proportion of investor/broker sales
in that micro-market. In terms of specific developers, we observed reasonable
progress in construction activity across projects of DLF, Unitech, and the Jaypee
Group where construction had commenced in FY10.
Outlook: Headwinds to weigh on near-term performance
We expect the realty sector to continue the underperform the broader indices in
the near-term on the back of headwinds in the form of tight liquidity, high
property prices and corporate governance issues. However, post the sharp
correction in stock prices, we recommend adding weight in select names. Among
large caps, we prefer DLF while among mid-caps, we prefer companies with
front-ended NAV such as Phoenix Mills and Brigade Enterprises.
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