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India: Real Estate Developers
Equity Research
2011 census update: Favour exposure to Bangalore and Gurgaon
Bangalore, Gurgaon, and Noida grew at >3% CAGR in last decade
We analyze the 2011 census data to study the shift in demographics. Our
analysis suggests the fastest population growth in Bangalore among
established locations and in Gurgaon among developing locations. Over
2001-11, Bangalore and Gurgaon grew at a CAGR of 3.7% and 5.7%,
respectively, versus the national average of 1.6%. Further, we believe the
growth rate in Gurgaon was back-ended as employment generation
increased post the middle part of the last decade. We believe higher
population growth indicates re-rating of a city and could offer higher
pricing growth of existing locations as new locations emerge on city
outskirts.
Kolkata and Mumbai growth has lagged national growth
Population growth rate in Kolkata of 0.7% indicates net outflux, and that
population growth has remained low IN the last two decades. The last 10
years have seen a sharp deceleration in population growth in Mumbai to
1.6% from 2.8%. We note that the population for Mumbai city has declined
and growth has been driven by Thane and Navi Mumbai, demonstrating
the low affordability in Mumbai.
Incremental office demand healthy for Gurgaon and Bangalore
Bangalore continues to be the leader in absorption of office space, with
cumulative absorption of 4.1mn sq ft in the last two quarters and 40.2mn
sq ft since CY2007. We observe that over the past six quarters, incremental
absorption has exceeded project completions in NCR and Bangalore.
Favour DLF and Sobha for exposure to Gurgaon and Bangalore,
respectively
In our coverage universe, DLF has the largest proportion of NAV from
Gurgaon (42%). We have a Buy rating on DLF with a 12-month FY13E NAVbased TP of Rs254. Prestige (80% of NAV) and Sobha (61% of real estate
NAV) have the highest exposure to Bangalore. Sobha also has an
additional 18% through its Gurgaon projects. We rate Sobha as Buy (on CL)
with a 12-m FY13E NAV-based TP of Rs340.
Key risks
Interest rate risk and continued weakness in commercial demand
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
India: Real Estate Developers
Equity Research
2011 census update: Favour exposure to Bangalore and Gurgaon
Bangalore, Gurgaon, and Noida grew at >3% CAGR in last decade
We analyze the 2011 census data to study the shift in demographics. Our
analysis suggests the fastest population growth in Bangalore among
established locations and in Gurgaon among developing locations. Over
2001-11, Bangalore and Gurgaon grew at a CAGR of 3.7% and 5.7%,
respectively, versus the national average of 1.6%. Further, we believe the
growth rate in Gurgaon was back-ended as employment generation
increased post the middle part of the last decade. We believe higher
population growth indicates re-rating of a city and could offer higher
pricing growth of existing locations as new locations emerge on city
outskirts.
Kolkata and Mumbai growth has lagged national growth
Population growth rate in Kolkata of 0.7% indicates net outflux, and that
population growth has remained low IN the last two decades. The last 10
years have seen a sharp deceleration in population growth in Mumbai to
1.6% from 2.8%. We note that the population for Mumbai city has declined
and growth has been driven by Thane and Navi Mumbai, demonstrating
the low affordability in Mumbai.
Incremental office demand healthy for Gurgaon and Bangalore
Bangalore continues to be the leader in absorption of office space, with
cumulative absorption of 4.1mn sq ft in the last two quarters and 40.2mn
sq ft since CY2007. We observe that over the past six quarters, incremental
absorption has exceeded project completions in NCR and Bangalore.
Favour DLF and Sobha for exposure to Gurgaon and Bangalore,
respectively
In our coverage universe, DLF has the largest proportion of NAV from
Gurgaon (42%). We have a Buy rating on DLF with a 12-month FY13E NAVbased TP of Rs254. Prestige (80% of NAV) and Sobha (61% of real estate
NAV) have the highest exposure to Bangalore. Sobha also has an
additional 18% through its Gurgaon projects. We rate Sobha as Buy (on CL)
with a 12-m FY13E NAV-based TP of Rs340.
Key risks
Interest rate risk and continued weakness in commercial demand
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