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India Equity Research Reports, IPO and Stock News
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India Property
Ears On The Ground 23:
Mumbai – Blinking Game
Continues
What’s going on in Mumbai: Stand-off between
property developers and home buyers is the best Way to
summarize the current market situation. 1Q11 primary
transaction volumes dropped by half sequentially due to
high property prices (20% or so above 1Q08 peak), high
ticket size (larger unit size), poor specs (carpet
efficiency dropped from 65% to 50-55%), and policy
uncertainty (car park, rental housing, etc.).
How long will the market remain stagnant? Our
recent conversations with a few prominent companies
suggest that they are in no hurry to cut prices. Asset
turnover and ROE are not the priority, margins are. Also,
most of the projects (70% plus) are still a few quarters to
3-4 years away from completion. There is hardly any
finished good inventory on hand. On the other hand,
home buyers can also wait. Rentals remain sedate
(20-30% below 1Q08 peak) due to steady delivery of
completed projects and the negative spread has
widened (rental yields 2-3%, mortgage rate 10-11%).
However, a few developers are feeling the pinch:
There are deals in the market, especially for investors.
Projects in pre-approval stage requiring upfront funding
are on offer on a soft launch basis (discount prices)
(Lodha (Wadala – Rs12,000 psf), Seasons (BKC,
Rs19,500 psf), Raheja (Worli, Rs19,000 psf), Rustomjee
(Khar, Rs17,000)). Plus, we discern 10-15% lower
prices in the new phase of older projects (also to
account for time value) such as OBER’s Exquisite II,
IBREL’s Panvel etc and 5-7% price cuts in select
projects (Ackruti’s Sunstone and Orbit’s Lower Parel).
What is our view? We do not expect broad-based or
deep price cuts. The market recovery could be gradual,
driven by select and modest (5-10%) cuts in price, better
affordability (stagnant prices versus 1-2 years of wage
inflation/savings) and policy clarity. We remain OW on
OBER, SDL, IBREL and DLF.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
India Property
Ears On The Ground 23:
Mumbai – Blinking Game
Continues
What’s going on in Mumbai: Stand-off between
property developers and home buyers is the best Way to
summarize the current market situation. 1Q11 primary
transaction volumes dropped by half sequentially due to
high property prices (20% or so above 1Q08 peak), high
ticket size (larger unit size), poor specs (carpet
efficiency dropped from 65% to 50-55%), and policy
uncertainty (car park, rental housing, etc.).
How long will the market remain stagnant? Our
recent conversations with a few prominent companies
suggest that they are in no hurry to cut prices. Asset
turnover and ROE are not the priority, margins are. Also,
most of the projects (70% plus) are still a few quarters to
3-4 years away from completion. There is hardly any
finished good inventory on hand. On the other hand,
home buyers can also wait. Rentals remain sedate
(20-30% below 1Q08 peak) due to steady delivery of
completed projects and the negative spread has
widened (rental yields 2-3%, mortgage rate 10-11%).
However, a few developers are feeling the pinch:
There are deals in the market, especially for investors.
Projects in pre-approval stage requiring upfront funding
are on offer on a soft launch basis (discount prices)
(Lodha (Wadala – Rs12,000 psf), Seasons (BKC,
Rs19,500 psf), Raheja (Worli, Rs19,000 psf), Rustomjee
(Khar, Rs17,000)). Plus, we discern 10-15% lower
prices in the new phase of older projects (also to
account for time value) such as OBER’s Exquisite II,
IBREL’s Panvel etc and 5-7% price cuts in select
projects (Ackruti’s Sunstone and Orbit’s Lower Parel).
What is our view? We do not expect broad-based or
deep price cuts. The market recovery could be gradual,
driven by select and modest (5-10%) cuts in price, better
affordability (stagnant prices versus 1-2 years of wage
inflation/savings) and policy clarity. We remain OW on
OBER, SDL, IBREL and DLF.
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