Mumbai Ready Reckoner Rates 2015 - Rates continue upward spiral :: HDFC securities

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Rates continue upward spiral
The Ready Reckoner Rates for CY15 in Mumbai
city and suburbs (up to Dahisar in western suburbs
and Mulund in eastern suburbs) reveal that rates
have seen a YoY increase of ~10% on average. This
comes on the back of annual increases of 15-20%
in CY13 and CY14 due to continued increase in
residential prices across Mumbai. The fresh round
of rate hikes will have a dual impact of increasing
outgo on fungible FSI for developers and stamp
duty for buyers.
The Eastern suburbs of Mumbai (Kurla-Mulund
belt) have seen a substantial hike of ~17%
whereas Mumbai City and Western suburbs
(Bandra-Dahisar belt) have seen relatively lower
hikes of ~7-8%. This in keeping with the steep rise
in property prices in the Eastern suburbs in CY14
owing to commencement of various infrastructure
initiatives. These include the Santacruz-Chembur
Link Road (SCLR), Andheri-Ghatkopar Metro and
Wadala-Chembur Monorail.
Our view is that developers will continue to offer
discounts of 5-10% in the medium term to boost
volumes in the form of staggered payment
schemes. However, developers will have to be
prudent in not taking price hikes too soon and also
focus on execution to curtail rising cost of
construction. We believe that developers with
strong execution and branding will generate
decent sales volumes. Hence, we reiterate our BUY
rating on Oberoi Realty (TP Rs 302, CMP Rs 271)
owing to its strong pipeline of launches across
Andheri, Mulund and Worli in 1HCY15.
Rates see fresh increase of 5-20%in CY15
 With a hike of 5-20% in ready reckoner rates in
CY15, homes in Mumbai are set to become costlier.
Although rates in certain pockets have increased by
over 70% over CY11-15, this is in keeping with the
rise in saleable rates for Mumbai city/suburbs. Post
the introduction of the amended DCR in Mumbai,
loading on carpet to saleable area has increased to
~67% from 50% over the last 24 months. Our
analysis reveals that market rates are still higher by
30-100% over the ready reckoner rates.
Rate hike to impact developers as well as buyers
 With the hike in ready reckoner rates, developers
will require to shell out additional money for
fungible FSI, a cost which they will look to pass on
to buyers. Buyers who currently pay stamp duty of
~5% on the agreement value will need to shell out
an additional 0.5-1% of agreement value. Although
the impact may appear marginal, buyers already
pay ~10-11% of agreement value in form of multiple
levies such as 5% stamp duty, 1% registration, 1%
VAT and 3-3.5% service tax. Also, the buyer pays
another 5-10% of the agreement value to
developers on possession for various amenities. As
a result, a buyer requires to pay ~20% of the
agreement value through his/her own savings, as
housing loans do not include these payments

http://www.hdfcsec.com/Share-Market-Research/Research-Details/StockReports/3010611