Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Key Takeaways
Long term macro story intact amid headwinds; JLL expects demand for industry
regulator to gain ground
Strong outlook of Indian economy with real GDP growth rate of 8-8.5% over the
next five years is the biggest demand driver of the real estate sector in India.
The staggering growth potential is also evident from the fact that the value of
investments made in real estate under construction crossed USD100b, ~66% devoted
to the residential vertical, ~25% to the commercial and rest to the retail vertical.
However there are operational and regulatory hurdles such as (a) infrastructure
delays, (b) cost inflation, (c) lack of mechanization and skilled labor to support
timely execution of plans, (c) absence of proper regulatory framework, and (d)
spiraling liquidity pressure. Apathy among government and institutional lenders and
delayed approvals have been other recent headwinds.
Residential sales, new launches slow; no major price correction expected
Rising residential property prices led to the stabilization of overall absorption rates
from 17.5% in 1QFY11 to 14.6% in 2QFY11. With several delays in approval and
plummeting sales, the momentum in new launches has also declined, with Chennai
being the only city to register a rise in new launches in 2QFY11.
Pune and NCR-Delhi led cities in terms of absorption rate recorded in 2QFY11,
followed by Chennai and Kolkata. Mumbai recorded the lowest absorption rate.
Key metros are unlikely to witness a major price correction. Buyer interest will
resume in Mumbai with moderate price correction for a brief period.
Commercial revival evident in metros; Occupier's market on supply overhang
Demand of office space is gradually improving with opportunistic tenants taking up
space at lower rentals. Net absorption to grow from 31msf in 2010, to 36msf and
41msf in 2011 and 2012. CBDs of key metros witnessed moderate rental up-tick.
Despite improving demand, vacancies are rising in the short term due to infusion of
office space, indicating ~50msf of unsold stock by the end of 2011. The vacancy is
expected to rise to 22.9% by the end of 2012 and then fall in 2013. NCR and Mumbai
will witness maximum supply, while Bangalore will witness lowest vacancy of 13%.
The IT/ITES sector is the biggest demand driver followed by the manufacturing and
BFSI sectors, which together account for 60-70% of office demand.
The recorded spread of 70-80bp between rental yields in CBDs and those of SBDs
and suburbs exists due to risks of a huge supply overhang expected in secondary
and suburban locations.
Oversupply, poor planning, inferior location lead to higher vacancies
Inferior floor planning, poor execution and location choice resulted in a dearth of
quality supply in the retail space. Therefore, while absorption has picked up in citycentric,
well executed projects, a supply overhang will keep its natural vacancy
level under pressure at over 25%.
Annual absorption is expected to increase to 12msf (4.7msf absorbed in 1H11 and
another 4.2msf pre-committed) against 4msf in 2010.
Supply is expected to witness strong rationalization after 2013 with several developers
planning to exit the retail vertical due to the complexity of execution and management.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Key Takeaways
Long term macro story intact amid headwinds; JLL expects demand for industry
regulator to gain ground
Strong outlook of Indian economy with real GDP growth rate of 8-8.5% over the
next five years is the biggest demand driver of the real estate sector in India.
The staggering growth potential is also evident from the fact that the value of
investments made in real estate under construction crossed USD100b, ~66% devoted
to the residential vertical, ~25% to the commercial and rest to the retail vertical.
However there are operational and regulatory hurdles such as (a) infrastructure
delays, (b) cost inflation, (c) lack of mechanization and skilled labor to support
timely execution of plans, (c) absence of proper regulatory framework, and (d)
spiraling liquidity pressure. Apathy among government and institutional lenders and
delayed approvals have been other recent headwinds.
Residential sales, new launches slow; no major price correction expected
Rising residential property prices led to the stabilization of overall absorption rates
from 17.5% in 1QFY11 to 14.6% in 2QFY11. With several delays in approval and
plummeting sales, the momentum in new launches has also declined, with Chennai
being the only city to register a rise in new launches in 2QFY11.
Pune and NCR-Delhi led cities in terms of absorption rate recorded in 2QFY11,
followed by Chennai and Kolkata. Mumbai recorded the lowest absorption rate.
Key metros are unlikely to witness a major price correction. Buyer interest will
resume in Mumbai with moderate price correction for a brief period.
Commercial revival evident in metros; Occupier's market on supply overhang
Demand of office space is gradually improving with opportunistic tenants taking up
space at lower rentals. Net absorption to grow from 31msf in 2010, to 36msf and
41msf in 2011 and 2012. CBDs of key metros witnessed moderate rental up-tick.
Despite improving demand, vacancies are rising in the short term due to infusion of
office space, indicating ~50msf of unsold stock by the end of 2011. The vacancy is
expected to rise to 22.9% by the end of 2012 and then fall in 2013. NCR and Mumbai
will witness maximum supply, while Bangalore will witness lowest vacancy of 13%.
The IT/ITES sector is the biggest demand driver followed by the manufacturing and
BFSI sectors, which together account for 60-70% of office demand.
The recorded spread of 70-80bp between rental yields in CBDs and those of SBDs
and suburbs exists due to risks of a huge supply overhang expected in secondary
and suburban locations.
Oversupply, poor planning, inferior location lead to higher vacancies
Inferior floor planning, poor execution and location choice resulted in a dearth of
quality supply in the retail space. Therefore, while absorption has picked up in citycentric,
well executed projects, a supply overhang will keep its natural vacancy
level under pressure at over 25%.
Annual absorption is expected to increase to 12msf (4.7msf absorbed in 1H11 and
another 4.2msf pre-committed) against 4msf in 2010.
Supply is expected to witness strong rationalization after 2013 with several developers
planning to exit the retail vertical due to the complexity of execution and management.
No comments:
Post a Comment