 "Home prices may drop in Mumbai, Gurgaon: report")
High prices, lower demand and liquidity issues may push prices lower in certain markets which saw some price appreciation in recent times, says Kotak Institutional Equities in a report on real estate sector.
“In Gurgaon, prices increased as there was no new construction for a year. The blended average ticket size of units here crossed that of Bangalore and Pune, which are much larger commercial, industrial and residential markets. In Mumbai, an 18-month approval hiatus halted the launch of new developments, restricting supply. However, now with more supply scheduled and a slow financial sector (and consequently slow commercial absorption), prices are expected to correct,” said the report.
The report noted that fewer home loans have being given out over the last few months, pointing to a drop in demand.
Also banks are lending less money to real estate developers, with their exposure to such companies reducing by Rs.4800 crore in the first half of the financial year ending in March 2013.
“A recent Government directive resulted in some increase in lending, but we believe this will be to select developers. Scare liquidity and low sales will lead to price corrections,” said the report.
New real estate launches declined by 30 per cent in 2012, according to a Knight Frank report.
The gap between number of new units launched and those sold during the year reduced to 32,000 compared to 94,000 in 2011, as realty players went slow on new launches.
Kotak has expressed a preference for Bangalore, Pune and Chennai on account of more end-user demand as opposed to Mumbai and Gurgaon where sales are more driven by people looking at real estate as an investment avenue.
The brokerage is bullish on DLF, Oberoi Realty, Prestige Estates and Sobha Developers.
It has a ‘Reduce’ rating on Godrej Properties on account of it being ‘fairly valued.’
It has initiated coverage on HDIL but has not rated it ‘due to lack of clarity on the promoters’ leverage.’