[T.S.R:14656] JPM Realty Check India: Primary sales data in Apr/May suggests volumes are stabilzing (ex Mumbai)

 

Just wanted to highlight that residential sales nos released for Apr/May across four key Indian cities (Mumbai, Gurgaon, Bangalore, Chennai) have picked up marginally by 3% Q/Q.This follows a 10-15% Q/Q volume decline witnessed in 1Q2010. While still early days, data shows that volume trends across markets now seem to be stabilizing at 1Q10 levels. This is consistent with guidance coming out of major property companies that overall they will look to sustain Jan-Mar Q run rate levels going into FY11 and the peak in terms of volumes is clearly behind us.   Within the respective markets , Mumbai has fared the worst with volumes in Apr/May down 14% Q/Q .However sales in other markets (Gurgaon, Bangalore, Chennai) have increased 2-23% Q/Q. Overall on a 5Month YTD (CY10) basis, absorption run rate in Mumbai is down ~20% as compared to CY09, whereas it is largely stable in other cities.   Average monthly absorption trends Source: Propequity Pricing in Mumbai/NCR continues to hold firm as months of inventory (Unsold Stock /Avg 3 Month sales) remains relatively low (7-10 months) . Bangalore/Chennai however still have 12-14 months of unsold inventory which is as yet restricting any meaningful price appreciation in these markets despite positive absorption trends at the margin.   Mumbai volumes down 14% Q/Q: Mumbai (ex Navi Mumbai/Thane) recorded average monthly unit sales of 1,838 units/month in Apr/May which is 14%/26% below from 1Q10/4Q09 average. 5M YTD (2010) absorption run rate is down ~20% as compared to 2009. Volume slowdown can be attributable to sharp price increases over the last year and seasonally weak period. Months of unsold inventory too has started to inch up (10 months vs. 9 months as of 1Q10) given high launch activity despite volume slowdown. Pricing however continues to remain stable across markets. Mumbai: Monthly absorption and months of inventory Source: Prop Equity, JP Morgan   Gurgaon absorption stabilizing, months of unsold inventory at 2 year low: Average monthly absorption of 2,176 units/months recorded in Apr/May is 9% higher than 1Q average. YTD the overall monthly absorption run rate is largely stable at CY009 levels. Months of unsold inventory (~7 months) continued to decline in the market and is currently at its two year low thereby keeping pricing relatively strong.     Gurgaon: Monthly absorption and months of inventory Source: Prop Equity, JP Morgan Southern cities (Bangalore/Chennai) witnessing healthy absorption trends with average sales run rate over Apr/May increasing by 5-20% from 1Q10 levels. Over Apr/May, Bangalore recorded average monthly absorption of 1,820 units (up 2% Q/Q, up 21% Y/Y), while Chennai recorded average monthly absorption of 1,307 units (up 23% Q/Q, flat Y/Y). Months of unsold inventory continued to decline across these markets, however it is still running at high levels of 12-14 months thereby restricting any meaningful price appreciation in these markets as yet. Bangalore: Monthly absorption and months of inventory Source: Prop Equity, JP Morgan Chennai: Monthly absorption and months of inventory Source: Prop Equity, JP Morgan        I certify that all of the views expressed in this research email accurately reflect my personal views about any and all of the subject securities or issuers; and that no part of my compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed herein. This email communication is for informational purposes only. 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