The latest PropEquity data suggests that
Bangalore saw monthly absorption of Rs 27.4 bn in January and February 2013,
the highest level in over 5 years, up 50% yoy. Residential sales growth has
been driven equally by volumes as well as pricing with price increases of 22%
yoy and a 23% increase in volumes. Given return of price appreciation in
Bangalore, we believe proportion of investors is rising, partly driving volume
increases.
We believe price increases in
Bangalore are backed by demand
We consider recent price hike in Bangalore
well justified since: (1) 3 month average transaction price at Rs. 4,070/sqft is
still reasonable especially if we compare to Chennai, which is at Rs. 4,340/sq
ft. (2) Last 3-yr and 4-yr pricing. CAGR at 11.5% and 8.8% is reasonable with
cumulative increase of 39% and 40% respectively. Residential prices in
Bangalore remained steady for three years between CY09-11. (3) We find
affordability 15% better than last 10-yr average. Going forward, we believe
similar affordability level will remain with price increases equaling impact
of lower interest rates/income rise.
Key areas of Bangalore: (1) Sarjapur road: This is one of the most active residential
hubs of Bangalore, with current prices around Rs. 5,500/sqft; (2) Jaya Nagar: This is an established luxury location with
pricing at Rs. 10,000- 12,000/sqft; (3) Southern suburbs: With pricing at Rs. 4,000-4,500/sqft, its an upcoming hub for IT
professionals; (4) Rajaji
Nagar/Malleswaram. This
is an upcoming luxury location with pricing at Rs. 9,000-10,000/sqft; (5) Hebbal: With wide price range of
Rs. 4,500-7,000+/sqft, this location is attractive to many investors due to price
points and it being in the direction of the airport.
Take
away points of Bangalore market
- Value growth driven by mix of pricing and Volumes
- Volume growth remains robust
- Pricing has increased steadily, still affordable
- New launches continue to be steady
- Inventory levels have remained stable
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