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India Property
Ears On The Ground 21 –4Q10 Data: Not Too Bad
Physical property market in consolidation: On an
aggregate basis (for the top seven metros), 4Q10
residential data released by JLL REIS suggest stability
in sales (in absolute terms) and rising inventory, even
though the property prices have risen past 2007’s peak.
To be specific, excluding the Noida market, 28.2k units
were sold in 4Q10 (down 5% qoq) versus the
four-quarter average of 27.9k units. However, a faster
pace of new launches during the quarter (44.7k units
versus 32.6k average for the last four quarters) led to a
rise in unsold inventory, resulting in a sequential drop in
the absorption rate to 16% (18% in 3Q10).
A few metros paint a healthy picture: Bangalore,
Pune, Chennai and Gurgaon appear to be doing good
volumes – 4k, 5.8k, 5.2k and 5.2k units, respectively,
implying 18%, 21%, 17% and 24% quarterly absorption
rates (units sold divided by unsold inventory). Gurgaon
data are an upside surprise, since our channel checks
suggest slower sales for premium projects.
Others are not doing all that well: Continuing their poor
sales trend, Hyderabad and Kolkata remain weak – 1.4k
and 1.8k units sold and 7% and 15% absorption rates.
Mumbai remains sluggish (2.6k units sold) with rising
inventory (12% absorption rate). However, to our surprise,
it showed a sequential improvement, possibly due to a few
bulk sales (such as 20/80 scheme prevalent then) during
the quarter. Noida remains a puzzle with the fourth straight
quarter of super normal (though sequentially waning) sales
– 16.6k units sold (vs. the four-quarter average of 17.5k
units). Its unsold inventory is 64.3k units (30% of total
inventory across seven metros).
Our view: Most developers are wrongly focusing on
margins instead of asset turn. Here on, we expect prices
to stabilize/drop (especially in Mumbai and Gurgaon)
and new launches to moderate, which should help lower
unsold inventory by 2H11. Given the inexpensive
valuations, we are constructive on the group and
maintain 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 21 –4Q10 Data: Not Too Bad
Physical property market in consolidation: On an
aggregate basis (for the top seven metros), 4Q10
residential data released by JLL REIS suggest stability
in sales (in absolute terms) and rising inventory, even
though the property prices have risen past 2007’s peak.
To be specific, excluding the Noida market, 28.2k units
were sold in 4Q10 (down 5% qoq) versus the
four-quarter average of 27.9k units. However, a faster
pace of new launches during the quarter (44.7k units
versus 32.6k average for the last four quarters) led to a
rise in unsold inventory, resulting in a sequential drop in
the absorption rate to 16% (18% in 3Q10).
A few metros paint a healthy picture: Bangalore,
Pune, Chennai and Gurgaon appear to be doing good
volumes – 4k, 5.8k, 5.2k and 5.2k units, respectively,
implying 18%, 21%, 17% and 24% quarterly absorption
rates (units sold divided by unsold inventory). Gurgaon
data are an upside surprise, since our channel checks
suggest slower sales for premium projects.
Others are not doing all that well: Continuing their poor
sales trend, Hyderabad and Kolkata remain weak – 1.4k
and 1.8k units sold and 7% and 15% absorption rates.
Mumbai remains sluggish (2.6k units sold) with rising
inventory (12% absorption rate). However, to our surprise,
it showed a sequential improvement, possibly due to a few
bulk sales (such as 20/80 scheme prevalent then) during
the quarter. Noida remains a puzzle with the fourth straight
quarter of super normal (though sequentially waning) sales
– 16.6k units sold (vs. the four-quarter average of 17.5k
units). Its unsold inventory is 64.3k units (30% of total
inventory across seven metros).
Our view: Most developers are wrongly focusing on
margins instead of asset turn. Here on, we expect prices
to stabilize/drop (especially in Mumbai and Gurgaon)
and new launches to moderate, which should help lower
unsold inventory by 2H11. Given the inexpensive
valuations, we are constructive on the group and
maintain OW on OBER, SDL, IBREL and DLF.
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