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MOSL: CONSUMER ELECTRICALS-Analyzing real estate demand trends in CY18

Consumer Electricals: Analyzing real estate demand trends in CY18; New residential launches and sales at highest levels since demonetization

 

We highlight the key takeaways from the Knight Frank report on India Real Estate, CY18 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 increased 119% YoY to 89,509 units in 2HCY18, albeit off a weak base of the year-ago period. Sales, too, grew by 10% YoY to 118,040 units over this period. For CY18, new housing launches were up by 76% YoY to 182,207 units, while sales increased by 6% YoY to 242,328 units. Both sales and launches are at the highest levels since demonetization, but still way below their peak levels (new launches down 62% from peak of 485,000 units in 2010 and residential unit sales down 35% from peak of 375,000 units in CY11 – refer Exhibits 1 and 2). Unsold inventory in the top 8 cities stood at 468,372 units (-11% YoY) for CY18, which is equivalent to 10.2 quarters of sales (peak of 720,000 units in 2HCY17).

Mumbai leads the list of residential unit launches/sales

Growing at 413% YoY, the Mumbai residential market accounted for a massive 41% of the total units launched in the 8 cities in 2HCY18 compared to 18% in 2HCY17. The surge in launches can primarily be attributed to the temporary lifting of the ban on new construction in March 2018 in the Mumbai municipal area. Even for CY18, Mumbai residential market exhibited healthy growth of 65% YoY (74,363 units launched v/s 23,253 units in CY17). While the Mumbai residential market also experienced the largest sales volume among all the cities in 2HCY18, the highest YoY growth was experienced by Bengaluru at 35%. Lastly, weighted average prices declined at an average of 2% across cities in 2HCY18, with Mumbai witnessing the highest decline of 7% YoY. Over the last four years, 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.