Healthy Sales Environment in Bangalore

CONNAUGHT PLACE, India - July 26, 2013 - PRLog -- 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