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HDFC SEC INSIGHTS

26 MAR 2014

Real Estate : Mumbai


Who blinks first?
Property registrations in Mumbai and its suburbs saw a 11% MoM decline to 4,858 units in Feb-14, below the 3 month moving average (3MMA) of ~5,750 units. For YTDFY14, registrations have grown by 6% YoY to ~57,047 units from 54,097 in YTDFY13, led by 22% YoY growth in Island City registrations, but muted 2% YoY growth in Mumbai suburbs. Although demand remains sluggish with property buyers in Mumbai continue to postpone purchases in anticipation of a price correction, supply side constraints have not seen improvement which we believe will lead to slow execution of projects in 1HCY14 as well. Our interactions with industry players including developers, consultants and brokers indicate that hopes are being pinned on a recovery in sentiment post Indian general elections which may lead to an uptick in volumes. However, one common concern that emerged during our interactions is that Mumbai property prices continue to remain unaffordable and any recovery may be short-lived unless prices correct from current levels. Another key fear is that as soon as buyers come back to the market, developers may again hike prices citing cost escalations on account of delays. As a result, volumes may not see a sustained recovery in Mumbai. Mumbai property registrations stabilise in CY14
The 3 month moving average (3MMA) for Mumbai property registrations which had declined to ~4,285 units in Nov-13, improved to 5,752 units in Feb-14. This was due to decent registrations in Dec-13 at 6,916 units, the highest for CY13. However, Feb-14 registrations of 4,858 units have declined below the 3MMA.

MMR continues to see large pre-launches

Although the overall approvals scenario at an aggregate level continues to remain slow in Mumbai city and suburbs, there have been a few large prelaunches in Mumbai in CY14. Prominent ones include Godrej Properties (NR) 150 acre Godrej City township at Panvel (carpet rate of ~Rs 8,400/psf), Wadhwa Developers 40 acre Anantya project at Chembur (base saleable rate of Rs 15,500/psf) and Ariisto Heaven Siesta at Mulund (base saleable rate of Rs 11,500/psf).

Hopes pinned on volume recovery post elections

Adhidev Chattopadhyay adhidev.chattopadhyay@hdfcsec.com +91-22-6171-7317

Although unaffordability in the residential segment continues to hurt volumes, there are no visible signs of price correction across MMR. Although a positive change in sentiment post general elections may lead to a temporary volume uptick, we believe that developers may resort to a fresh round of price hikes to cover increased project costs that may again lead to a decline in volumes.

HDFC securities Institutional Research is also available on Bloomberg HSLB <GO> & Thomson Reuters

HDFC SEC INSIGHTS : REAL ESTATE

MUMBAI PROPERTY REGISTRATIONS FALL IN FEB-14

YTDFY14 REGISTRATIONS HAVE INCREASED 6% YoY


Total 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 Nos 65,828 45,508 75,420 71,309 58,077 Y-o-Y (%) % 61,049 80.0

Feb-14 registrations at 4,858 were flat YoY and down 11% MoM After a surge in Dec-13, a month that typically sees the highest monthly registrations in a calendar year, registrations have again tapered off in Jan-Feb 14

Monthly registrations 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 Nos

3M MA

57,047 60.0 40.0 20.0 0.0 (20.0) (40.0)

Source: DGR Mumbai, HDFC sec Inst Research

Jun-07 Nov-07 Apr-08 Sep-08 Feb-09 Jul-09 Dec-09 May-10 Oct-10 Mar-11 Aug-11 Jan-12 Jun-12 Nov-12 Apr-13 Sep-13 Feb-14

Source: DGR Mumbai, HDFC sec Inst Research

ISLAND CITY REGISTRATIONS HAVE SURGED 22% YTD..


Total Y-o-Y (%) 12,158 10,486 8,058 10,149 10,082 % 40.0

SUBURBS HAVE SEEN MUTED 2% YTD GROWTH


Total 70,000 60,000 50,000 40,000 30,000 20,000 10,000 Nos 54,620 37,450 64,934 59,151 47,928 50,967 46,200 Y-o-Y (%) % 80.0 60.0 40.0 20.0 0.0 (20.0) (40.0)

FY14 YTD Island city registrations have surged 22% YoY, but suburbs have seen muted 2% YTD growth

14,000 12,000 10,000 8,000 6,000 4,000 2,000 -

Nos 11,208

10,847 30.0 20.0 10.0 0.0 (10.0) (20.0) (30.0) (40.0)

FY14YTD

FY08

FY09

FY10

FY11

FY12

FY08

FY09

FY10

FY11

FY12

FY13

FY13

Source: DGR Mumbai, HDFC sec Inst Research

Source: DGR Mumbai, HDFC sec Inst Research

FY14YTD

FY14YTD

FY08

FY09

FY10

FY11

FY12

FY13

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HDFC SEC INSIGHTS : REAL ESTATE

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