Quick Bite – Mumbai Realty - Housing Sales Subdued - PINC Research

The Feb'12 housing registration data for Mumbai and Mumbai suburbs was down 7% from Jan'12 and 13% YoY. The housing registration, as expected, has remained subdued over past 1-year owing to lower absorption because of high interest rates, lower affordability and slower pace of new launches. However, off late, we have started to see new launches hit the ground and we also expect ~100-150 bps cut in interest rate in FY13 (first cut expected in Q1FY13). This will help improve the absorption scenario going forward.

Poor registration numbers a reflection of the ground reality

The Feb'12 housing registration data for Mumbai and Mumbai suburbs was down 7% from Jan'12 and 13% YoY. Also, the registrations, which usually shoot up in the month of December every year, were significantly lower in Dec'11 as compared to previous years. We attribute this fall in housing demand over the past 1-year primarily to high interest rates, poor affordability and slower pace of new launches. In addition to the poor response from buyers, delay in project approvals from the authorities has reduced the pace of new launches thereby reducing fresh sales.

Going forward

We believe that any lowering of the interest rates, which we expect to happen sometime in Q1FY13, will help improve sentiments and bring back affordability. Residential sales have remained subdued over the past 1-year since buyers have stayed on the sidelines due to poor affordability and also because of lower number of new launches. This has also led to an increase in inventory levels. But with new launches (see next page) hitting ground and with expected improvement in affordability we expect absorption to improve with conversion of demand.

RECOMMENDATION

We expect affordability to improve going ahead on cut in interest rates. We prefer DLF (upside - 48%) and HDIL(107%) in the large cap space and Phoenix (24%) and Puravankara (120%) in mid caps.

Source : Equity Bulls

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