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You are here : IndiaNotes >> Research & Analysis >> Industries >> Construction >> Research

Real Estate: Activity for the sector has been sluggish

Prabhudas Lilladher | 15 Oct, 2013  | Follow Author | Add to my Favourites 
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Real Estate


Being the pre-festive quarter, activity for the real estate sector has been sluggish. Further, the sector is likely to continue on its sluggish journey as buyers chose to keep away from a market that is bearing the brunt of delays in approvals, rising construction costs and high interest rates.


Inventory levels have continued their northward journey with transaction levels falling to a trickle. Although Mumbai witnessed strong registration numbers for the first five months of which was on account of the previous festive season launches, sales for the same period have remained dull which got reflected in June & July 2013 registration numbers. Prices have remained soft and volumes declined for both Mumbai and NCR. Bengaluru has remained strong on the back of several launches and a favourable affordibility equation.


RBI, in its September monetary policy review, surprised the market by raising the benchmark repo rate by 25bps to 7.5%. Further, the tone of the policy statement was fairly hawkish, with central bank focusing on bringing down inflation and hence, any easing looks far away. This is obviously negative for the real estate sector since lending rates are expected to remain sticky besides being a deterrent to home buyers as well.


Companies are cautiously optimistic about the forthcoming festive season to revive the slackness that has set in. However, with the overall economic slowdown, the market is tending towards becoming a buyers market with the number of purchase options increasing.


Residential


Bengaluru's residential Real estate market remains resilient despite global turmoil driven by demand for mid-end homes. The city witnessed a strong spike in inventory levels on account of a large number of new launches that have taken place over the last two quarters.


Mumbai Residential market has been experiencing some levels of activity as new launches during CY12 have increased competition amidst low demand, thus, leading to softening prices in a few projects. Sales registrations, through the first five months of CY13, held strong, but weakened in the next two months, reflecting the lack of transaction activity in the city.


Registration data is likely to remain weak for the next couple of months reflecting the dull mosoon sales. Going forward, the festive season remains the ray of hope to kickstart sales.


Commercial


On account of a strong take-up in Bengaluru, where a transaction of 1m sq.ft was completed, the overall take-up across the seven largest cities in the country recorded a growth of 74% on a QoQ basis. Aggregate new supply in Q2FY13 across the seven cities stood at 4.5m sq.ft, which was a 31% decline QoQ but up 42% YoY.


The office market in Mumbai was extremely weak, reflecting the economic sentiment. After witnessing a consistent increase in take-up levels over the last three quarters, office space take-up recorded a drop of 21% QoQ. New supply of commercial space has been limited and hence, the vacancy levels witnessed a small decline during the quarter. Rentals have also been witnessing downward pressure with the drop in transactions.


Office space take-up in Bengaluru increased sharply to 4.2m sq.ft over Q2FY13. Takeup in Bengaluru was driven by a number of major pre-commitments and big ticket size deals of more than 100,000 sq.ft. Vacancy levels declined during the quarter and rentals have remained stable with a slight upward pressure on acccount of a shrinkage in forthcoming supply.


NCR witnessed an improvement in take-up during the quarter which resulted in a small decline in vacancy rites. However, overall vacancy rates continue to remain very high in the region, resulting in rentals remaining stable with slight downward pressures.



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About Prabhudas Lilladher

Prabhudas Lilladher has a nationwide distribution network, consisting of branches, franchisees and associates, providing a comprehensive gamut of financial services in the Institutional and Retail domain. Their services includes Equity, derivatives; margin funding, mutual funds, PMS, IPOs and online trading.

 

For more information please write in to [email protected]

Disclaimer: The author has taken due care and caution to compile and analyse the data. The opinions expressed above are only the views of the author, and not a recommendation to buy or sell. Neither the author nor IndiaNotes.com accept any liability whatsoever arising from the use of any of the above contents.




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