Real Estate
The real estate markets have shown a cautious outlook, with sales remaining tepid,
and unsold inventory levels witnessing an upward trend. Rising property prices,
coupled with firm interest rates, have also kept genuine buyers away from taking
decisions.
With the onset of the festive season, several projects were launched across the
country. However, with the exception of Bengaluru, offtake has not yet been exciting
in most places; hence, leading to piling inventories.
However, with the RBI indicating a softer interest rate regime, the sentiment seems
to improve, both from a consumer as well as a company standpoint. At specific price
points, we have witnessed good demand for products and hence, a change in the
monetary policy stance could provide the required impetus.
Company balance sheets are witnessing an improvement, with companies steadily
repaying debt and exhibing caution on land bank addition. With input prices and
land prices spiralling, a rate-cut would be the much-required breather for real estate
companies.
The quarter has been a game-changer for DLF, with the receipt of Rs27bn from
Lodha Developers from the sale of Mumbai land parcel as well as completion of
Aman hotel sale transaction. The company now seems to be in a position to revamp
its balance sheet by bringing down debt to manageable levels.
BSE Realty Index has returned 14.9% for the October-December period, while the
SENSEX has returned 3.2% for the same periods.
Residential
Sales in Bengaluru remained strong and despite a slew of new launches, inventory
levels witnessed a decline. In the NCR region, sales recovered from the dismal lows
of the previous quarter, with Greater Noida witnessing some good activity in terms
of launches and sales. However, inventory levels, once again saw a sharp increase.
Mumbai sales have remained status quo. However, with the new launches in the
city, inventory levels continue to rise.
Sales registrations for Mumbai have been dismal since June 2012, with October and
November witnessing the lowest numbers for the fiscal. However, this would be a
reflection of the pre-festive season where there were no launches, coupled with a
tough macro-economic situation. Registration numbers are likely to look up from Q4
onwards as they would reflect the festive season where several projects were
launched.
The key to watch out for is the monetary policy stance as it could be of help to
correct the stressed affordability equation. Besides, it could also inspire developers
to offer products at interesting price points.
An interesting trend is the recent drop in rentals in the high-end segment in
Mumbai, indicating a large pool of investor units available for rent not finding the
requisite tenants. The existence of low rentals and high prices may be a reflection of
the fact that Mumbai investors are not sensitive to rental yield of properties.
Commercial
Commercial market continued to remain weak and vacancy levels remained high,
with NCR being the worst performer on this parameter.
Mumbai lease registrations plummeted 23% YoY and 20% MoM to a 24-month low
and vacancy levels remained high at 22.7%. Overall, the sentiment for commercial
real estate has been extremely dull, with several developers converting planned
commercial projects to residential.
For the Bengaluru commercial market, offtake improved slightly vis-a-vis the
previous quarter which was extremely dismal. The take-up number, which has
plummeted from 3.6m sq.ft in Q12012 to 1.8m sq.ft in Q22012, revived to 3m sq.ft
in Q3. Vacancy levels declined from 14% to 13%.
In the NCR, volumes declined from 1.7m sq.ft to 1.2m sq.ft, with vacancy levels
remaining steady at ~30%.
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