Citibank property-insights-q1-2014


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a treasure of what all has is happenning in real estate from CITIBANK.


  • 1 India recorded a growth of 4.7% in Q3 FY14 (October-December 2013) over Q3 FY13. This was a marginal decline compared to Q2 FY14s growth rate of 4.8%. Majority of the growth during the quarter was driven by services sector. The financing, insurance, real estate and business services sector registered maximum growth of 12.5% during the quarter, followed by community, social and personal services sector, which grew at 7% and trade, hotels, transport and communication at 4.3%. Apart from this, all other sectors witnessed a slowdown in the growth rate as compared to the previous quarter. The pick-up in manufacturing activity during Q2 FY14 failed to sustain its momentum and registered a negative growth rate compared to the same period last year. The Construction sectors performance also remained almost at par with levels observed last year, recording only a 0.6% growth. The overall GDP growth for April-December 2013 was estimated at 4.6%, registering a marginal improvement from 4.5% duringthesameperiodlastyear. The Reserve Bank of India (RBI) raised the repo rate by 0.25 basis points to 8% in January 2014. This decisionwasdrivenbytheneedtosettheeconomyon the disinflationary path; targeting CPI below 8% by January 2015 and below 6% by January 2016. ApprehensionofafurtherdeclineingrowthduringQ3 2013-14 due to subdued outlook evident in the industrial and services sector also aided this decision. The Asian Development Bank (ADB) revised Indias 2014-15 growth forecast to 5.5% from an earlier estimate of 5.7% in October 2013. The RBI also suggested that though a revival from around 5.0% growth in 2013-14 is certain in the coming year, downside risks to central estimate of 5.5% for 2014-15 remain. This prediction came on the back of apprehensions that India might face a weak monsoon season this year. Additionally, there have been no clear indicators on sustained revival of industrial and services sector amidst a moderation in global economic activity. The easing of supply bottlenecks, revival of exports with pick-up in the world economy andtheimplementation of stalled projects all have to play a role in sustaining this positive outlook. The INDIA MARKET OVERVIEW GROSS DOMESTIC PRODUCT GROWTH RATE PROPERTY INSIGHTS India Quarter 1, 2014 Subdued Demand, Stable Outlook GrowthRate(%) Source: Central Statistical Organisation, Govt. of India 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% Oct-Dec 07 Jan-M ar 08 Apr-Jun 08 Jul-Sep 08 Oct-Dec 08 Jan-M ar 09 Apr-Jun 09 Jul-Sep 09 Oct-Dec 09 Jan-M ar 10 Apr-Jun 10 Jul-Sep 10 Oct-Dec 10 Jan-M ar 11 Apr-Jun 11 Jul-Sep 11 Oct-Dec 11 Jan-M ar 12 Apr-Jun 12 Jul-Sep 12 Oct-Dec 12 Jan-M ar 13 Apr-Jun 13 Jul-Sept 13 Oct-Dec 13
  • Economic Trends Trends & Updates 2 EXCHANGE RATE MOVEMENT (INR/USD) BSE REALTY INDEX Source: RBI INR/USD Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Mar-13 Mar-14 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-13 Jan-14 Feb-13 Feb-14 70 65 60 55 50 45 40 INDEX Source: BSE Jun-10 Jun-11 Jun-12 Jun-13 Sep-10 Sep-11 Sep-12 Sep-13 Dec-10 Dec-11 Dec-12 Dec-13 M ar-11 M ar-12 M ar-13 M ar-14 4000 3500 3000 2500 2000 1500 1000 500 500 1 Top eight cities include Ahmedabad, Bengaluru, Chennai, Hyderabad, Kolkata, Mumbai, NCR and Pune. Current Account Deficit (CAD) shrunk to 0.9% of GDP during Q3 2013-14 due to a narrowing trade deficit resulting from higher exports and moderation in imports. However, it is expected to be around 2% of the GDP for 2013-14, much lower than the 4.8% of GDP in 2012-13. External financing conditions improved in February, as investors started responding to the economic developments in emerging markets by the way of reallocations considering the probable impact of the U.S. Fed tapering. However, exports growth dipped during the quarter, amidst decline in global demand due to overall slowdown. The commercial office space across top eight 1 cities of India recorded total net absorption of 5.9 million square feet (msf) during the first quarter of 2014. Nearly 92% of this net absorption was in Grade A developments. Hyderabad contributed 30% of the total net absorption during the quarter followed by NCR with 25% share. Majority of the absorption in Hyderabad (which recorded more than 100% quarterly rise) was driven by pre-commitments. The total leasing during this period across the top eight cities was 8.5 msf, indicating the continuing trend of relocation. These cities recorded a total supply of nearly 7.3 msf during the quarter and an overall vacancy of 18.9%. In the retail sector, only 0.35 msf of mall space supply was added across the eight cities compared to 1.18 msf in Q4 2013. Due to this supply decline and stable transaction activity, mall vacancies dropped or remained stable in most of the cities exceptAhmedabadandPune. In1Q2014,residentialunitlaunchesacrossthetop eight cities recorded a quarter-on-quarter (q-o-q) increase of 42%. Nearly 55,500 units were launched in this quarter, with Bengaluru contributing around 30% to the total launches. The capital values continued to remain sticky across segments in these top cities. However, GST submarket in Chennai recorded the highest quarterly capital value appreciation of 10% in the mid-end segment due to persistent demand for residential properties located in proximity to the workplaces. Quarterly mid-end segment capital value appreciation of upto 8% was recorded in certain submarkets of Bengaluru, Hyderabad and Pune. NCR witnessed a correction across segments in certain submarkets of the city due to sluggish demand and unsold inventory pile-up. Thus, although the launch activity picked up during the quarter, residential markets across cities continued to exhibit a subdued demand trend with buyers adopting a wait-and-watch approach due to prevailing economic scenario and uncertainty on resultsofupcominggeneralelections. After the repo rate hike in January 2014, headline inflation receded from 11.2% in November 2013 to 8.1% in February 2014. This decline in inflation could be attributed to the sharp seasonal correction in food prices.Theex-foodandfuelCPIinflationhasremained sticky at around 8% for nearly 20 months in a row, posing significant threat to growth and making a strong case for retightening of monetary policy to align with countrys fiscal targets. The WPI inflation also eased to 4.7% in February 2014 from 7.5% in November 2013. This was led by the disinflationary impulses in food prices; however, the inflation in non- food manufactured products rose marginally from 2.2-2.6% in May-September 2013 to 3.1% in February 2014. The RBI has stated that though the inflation
  • FDI INFLOW IN HOUSING AND REAL ESTATE SECTOR has started to moderate, further easing of inflationary pressures will depend on the impulses from policy actions, the play of food inflation and the extent of negative output gap. Thus, although the inflation is expected to moderate, it is likely to remain above the comfort zone. The Indian economy recorded a GDP growth of 4.7% in Q3 2013-14. Although this was marginally higher than the growth recorded during the corresponding quarter of previous year, concerns of growth revival escalated because the economy now needs to record a 5.5% growth in Q4 2013-14 in order to meet estimates of 4.9% GDP targeted for the fiscal year. This seems difficult considering Q3 2013-14 was the seventh consecutive quarter with a sub 5% growth. Although moderation in inflation provided someroomforrecovery,thedownsideriskscontinued to remain due to weak performance of the manufacturing sector and increased risks to the agricultural sectors performance due to uncertainty of south-west monsoons. Thus, recovery remains largely dependent on improvement in the investment climate, external demand facilitated by improvement in global financial and monetary conditions and improvement in business and consumer confidence aided by the formation of a stable central Government. The Rupee closed at INR 60.1 against the U. S. Dollar in March 2014 almost reaching levels prior to the devaluation/volatility slide in June 2013. This improvement in the Rupee value could majorly be attributed to the decline in inflationary pressures during the past two-three months. In addition, reallocations and improvement Residential capital values remained stable across the high-end segment in Ahmedabad, Chennai, Hyderabad and Mumbai. Mid-end segment capital values in Ahmedabad and Mumbai also remained stable; however GST Road in Chennai registered a 10% appreciation on a q-o-q basis, mainly driven by high demand from working professionals and new projects being launched at higher price points. Though high-end capital values for Bengaluru mostly remained stable, certain areas such as Koramangala, JP Nagar, Bannerghatta, Kanakpura, etc. in the southern region registered a marginal q-o-q in the external financing conditions also played a pivotal role in strengthening of the Rupee. The tightening of financial conditions during beginning of the year, the downslide of inflation and the improvement in the Rupee contributed to the recovery in BSE Realty Index. The index touched 1468 st points on 31 March 2014 at the close of the financial year, rising nearly 35 points above its December closingof1433points. India witnessed total FDI inflows of INR 24,632 crore in Q3 2013-14 (October-December 2013). The Construction Development sector contributed 6% (INR 1,432 crore) to the total FDI, registering a 55% q- o-qdecline.Thisdeclinecouldmajorlybeattributedto the fact that the previous quarter registered highest FDI in Construction Development in sixteen quarters. In addition, FDI numbers for July-September 2013 were revised to 45,153 crore, leading to overall q-o-q decline of 45%. Thus, the improvement in market sentiment evident from the pick-up i