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India Property
Ears On The Ground 26: 3Q
Data – Pass-through Quarter
Quick Comment: Based on JLL REIS 3Q residential
data for the top 7 metro areas in India, the physical
market appears to be more or less stagnant and stable.
Higher property prices (15-30%) above 1Q08 peak
(lower in real terms), peak interest rates (11-12%
mortgage rate), and weakening sentiment has not yet
translated into a meaningful slowdown in property sales
in India (ex Mumbai and Noida). However, some slowing
in new launches could be indicative of early signs of
waning developer confidence. The highlight of the
quarter was the precipitous decline in Noida.
A look at the data (Exhibit 2): The top seven metros
areas (ex Noida) recorded new sales of 32.5k units
(sequentially flat). New launches (four years to construct
and deliver) were 30.3k units (-14% sequentially, last
four-quarter average of 44.4k units). Stable new sales,
but lower new launches, resulted in a marginal (1%)
uptick in the absorption rate to 15% (implying five-plus
quarters of unsold inventory). In the worst period (4Q08),
new sales were 14k units new launches were 17.4K
units and the absorption rate was 10%
By-City Commentary: Gurgaon was the stand-out
market with sustained new sales (6k units, in line with
four-quarter average) and the highest absorption rate
(24%). Bangalore, while maintaining its new sales
momentum (3.7k units), continues to see its absorption
rate fall (11%) due to high new launches. New sales
were low for Mumbai, Noida and Pune (versus history)
and for Kolkata and Hyderabad – Exhibit 12.
Now What: With a little equity and debt funding, firms
are becoming increasingly reliant on development
income to generate cash flows and de-leverage. As of
now, companies are showing little urgency to scale up
new sales targets. This means that the pace of
de-leveraging will be slow and ROEs will stay in single
digits. If GDP does decelarate and/or global macro
worsens, developers may have to cut prices. Maintain
OW on OBER, SDL, IBREL and EW on DLF, JIL, and
GPL.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
India Property
Ears On The Ground 26: 3Q
Data – Pass-through Quarter
Quick Comment: Based on JLL REIS 3Q residential
data for the top 7 metro areas in India, the physical
market appears to be more or less stagnant and stable.
Higher property prices (15-30%) above 1Q08 peak
(lower in real terms), peak interest rates (11-12%
mortgage rate), and weakening sentiment has not yet
translated into a meaningful slowdown in property sales
in India (ex Mumbai and Noida). However, some slowing
in new launches could be indicative of early signs of
waning developer confidence. The highlight of the
quarter was the precipitous decline in Noida.
A look at the data (Exhibit 2): The top seven metros
areas (ex Noida) recorded new sales of 32.5k units
(sequentially flat). New launches (four years to construct
and deliver) were 30.3k units (-14% sequentially, last
four-quarter average of 44.4k units). Stable new sales,
but lower new launches, resulted in a marginal (1%)
uptick in the absorption rate to 15% (implying five-plus
quarters of unsold inventory). In the worst period (4Q08),
new sales were 14k units new launches were 17.4K
units and the absorption rate was 10%
By-City Commentary: Gurgaon was the stand-out
market with sustained new sales (6k units, in line with
four-quarter average) and the highest absorption rate
(24%). Bangalore, while maintaining its new sales
momentum (3.7k units), continues to see its absorption
rate fall (11%) due to high new launches. New sales
were low for Mumbai, Noida and Pune (versus history)
and for Kolkata and Hyderabad – Exhibit 12.
Now What: With a little equity and debt funding, firms
are becoming increasingly reliant on development
income to generate cash flows and de-leverage. As of
now, companies are showing little urgency to scale up
new sales targets. This means that the pace of
de-leveraging will be slow and ROEs will stay in single
digits. If GDP does decelarate and/or global macro
worsens, developers may have to cut prices. Maintain
OW on OBER, SDL, IBREL and EW on DLF, JIL, and
GPL.
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