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MOSL: CONSUMER ELECTRICALS-Analyzing real estate demand trends in 1HCY18

Consumer Electricals: Analyzing real estate demand trends in 1HCY18; New residential launches and sales at highest levels since demonetization

 

We highlight key takeaways from the Knight Frank report on India Real Estate, January-June 2018 for the residential and commercial real estate market in the top 8 cities. Real estate launches, completions and sales are a key demand driver for the Consumer Electricals industry in India, and therefore, a key monitorable.

•  Residential real estate – new launches and sales at highest levels since demonetization: New housing launches during 1HCY18 (January-June 2018) grew 46% YoY to 91,739 units (albeit off a low base of 1HCY17). Sales too grew 3% YoY to 124,288 units. Both sales and launches are at the highest levels since demonetization. However, we note that both new launches and sales are still below their peaks. While new launches are down 79% in CY17 at 103,570 units (v/s the peak of 485,000 units in 2010; see Exhibit-1), residential unit sales are down 39% in CY17 (v/s the peak of 375,000 units in CY11; see Exhibit-2). Unsold inventory in the top 8 cities stood at 497,289 units (-17% YoY) as of June 2018, which is equivalent to 11.2 quarters of sales (peak of 720,000 units in 2HCY17).
•  Mumbai heads the list of residential unit launches and sales in 1HCY18: Growing at 128% YoY, the Mumbai residential market accounted for a massive 40% of the total units launched in the 8 cities in 1HCY18 compared to 25% in 1HCY17. The surge in launches is primarily due to the temporary lifting of the ban on new construction since March 2018 in the Mumbai municipal area. While the Mumbai residential market also experienced the largest sales volume among all the cities, the highest YoY growth was experienced by Bengaluru at 22%. Lastly, weighted average prices declined an average of 3% across cities in 1HCY18, with Mumbai seeing the highest decline at 9% YoY. During the last four years, the growth in residential prices in most of the top 8 cities of India has been below retail inflation growth and the gap has progressively increased since 1HCY16, with the exception of Hyderabad.