Realty builds on revival, brick by brick
Financial Express, January 21, 2010, Page 14
Nikita Upadhyay
The realty sector, which was hit by the slowdown in purchases, could well be at the cusp of a revival, highlight December 2009 earnings. Industry analysts reckon that signs of revival in property volumes are evident. The harbinger could well be price rises in certain locations in Mumbai, where developers have sought prices that match the March 2008 peak levels.
However, a Motilal Oswal Securities (MOSL) report suggests that volumes are unlikely to surge in the near term unless prices moderate by 5-8% from the current level. Several suburban projects in Mumbai have been delayed due to lack of approvals and developers have been faced with pressure from customers demanding refunds. Home buyers are shifting focus to ready-to-move-in projects or projects nearing completion, says the report.
Even with lower volumes, sales seem to be flowing at a steady pace in the National Capital Region (NCR), despite price increases. “Prices increased by 5-10% across key projects since August, 2009. Prices in some key areas in South Delhi have moved to new highs. Demand from non-resident Indians is a demand driver in the NCR,” adds the report.
South India also witnessed some recovery with sales gaining momentum in Bangalore and Chennai. Recovery in Bangalore picked up steam as the December, 2009, quarter progressed. “Sales volumes have gained momentum over the past few months, with transactions having increased by about 40% on a yearly basis. Momentum of new launches and sales continues, however, due to excessive supply and high inventories, prices are unlikely to increase in the near term,” pointed out the report.
The December, 2009, quarter has also seen a strong momentum in launches. According to Jones Lang LaSalle Meghraj (JLLM), while new launches from January to March, 2009, in seven key metro cities totalled to 24,400 units, new launches in April to June, 2009, stood at 42,458 units. Tier-1 cities of Delhi and Mumbai accounted for almost 64% of the launches.
The market has started to re-look at realty stocks closely. The central bank’s policy was a cautious one. However, in the current year the tide seems to have changed and the real-estate companies are no longer pariahs. Godrej Properties managed to raise Rs 500 crore and a decent listing gain of around 15%.
According to ICICI Securities, revival in equity and real-estate markets may lead developers, including Emaar MGF, Lodha Developers, DB Realty, Sahara Prime City and Ambience, to target primary markets. “These firms could potentially raise Rs 12,000 crore in March, 2009, quarter. We believe with recent price correction in listed real estate companies, they offer a better opportunity for investment at current prices,” the report says.
As the recovery in the residential properties saw strong volume and price momentum, the same for the commercial and retail vertical is daunting. “While leasing is yet to pick up strongly, the commercial and retail verticals are set to revive over next 6-9 months, noted the MOSL report.
Another report from ICICI Securities mentions that both commercial and retail segments continue to lag. “We do not expect any pick-up in the year 2009-10. We believe the uptrend will continue, gaining from increase in housing demand, affordable home loan interest rates and timely execution,” said the report.
Financial Express, January 21, 2010, Page 14
Nikita Upadhyay
The realty sector, which was hit by the slowdown in purchases, could well be at the cusp of a revival, highlight December 2009 earnings. Industry analysts reckon that signs of revival in property volumes are evident. The harbinger could well be price rises in certain locations in Mumbai, where developers have sought prices that match the March 2008 peak levels.
However, a Motilal Oswal Securities (MOSL) report suggests that volumes are unlikely to surge in the near term unless prices moderate by 5-8% from the current level. Several suburban projects in Mumbai have been delayed due to lack of approvals and developers have been faced with pressure from customers demanding refunds. Home buyers are shifting focus to ready-to-move-in projects or projects nearing completion, says the report.
Even with lower volumes, sales seem to be flowing at a steady pace in the National Capital Region (NCR), despite price increases. “Prices increased by 5-10% across key projects since August, 2009. Prices in some key areas in South Delhi have moved to new highs. Demand from non-resident Indians is a demand driver in the NCR,” adds the report.
South India also witnessed some recovery with sales gaining momentum in Bangalore and Chennai. Recovery in Bangalore picked up steam as the December, 2009, quarter progressed. “Sales volumes have gained momentum over the past few months, with transactions having increased by about 40% on a yearly basis. Momentum of new launches and sales continues, however, due to excessive supply and high inventories, prices are unlikely to increase in the near term,” pointed out the report.
The December, 2009, quarter has also seen a strong momentum in launches. According to Jones Lang LaSalle Meghraj (JLLM), while new launches from January to March, 2009, in seven key metro cities totalled to 24,400 units, new launches in April to June, 2009, stood at 42,458 units. Tier-1 cities of Delhi and Mumbai accounted for almost 64% of the launches.
The market has started to re-look at realty stocks closely. The central bank’s policy was a cautious one. However, in the current year the tide seems to have changed and the real-estate companies are no longer pariahs. Godrej Properties managed to raise Rs 500 crore and a decent listing gain of around 15%.
According to ICICI Securities, revival in equity and real-estate markets may lead developers, including Emaar MGF, Lodha Developers, DB Realty, Sahara Prime City and Ambience, to target primary markets. “These firms could potentially raise Rs 12,000 crore in March, 2009, quarter. We believe with recent price correction in listed real estate companies, they offer a better opportunity for investment at current prices,” the report says.
As the recovery in the residential properties saw strong volume and price momentum, the same for the commercial and retail vertical is daunting. “While leasing is yet to pick up strongly, the commercial and retail verticals are set to revive over next 6-9 months, noted the MOSL report.
Another report from ICICI Securities mentions that both commercial and retail segments continue to lag. “We do not expect any pick-up in the year 2009-10. We believe the uptrend will continue, gaining from increase in housing demand, affordable home loan interest rates and timely execution,” said the report.
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