>REAL ESTATE DEVELOPERS (GOLDMAN SACHS)

Themes emerging from data, site visits and channel checks
We list key themes for the property sector following analysis of recent industry data and our recent site visits and channel checks with brokers in Delhi-NCR, Chennai and Bangalore:

1. Pan-India monthly residential sales volumes has moderated from an aggregate 19,700 units/month sold in March-May to 16,100 units in June- August across the markets we track. However, it should be borne in mind that this period may be seasonally weak and we await data for September- October to see if there has been a festive season pick-up.

2. Residential new launch absorption has fallen from between 40%-60% in April-June to about 20%-25% in Jul-Aug. We note the number of launches in Jun-Aug was lower vs. Mar-May and prices for some new launches have also gone up.

3. Moderation in affordable housing take-up. The inventory of unsold homes in the Rs0.5-Rs3.0 mn/unit range has been increasing through CY2009. Cumulative absorption is encouraging in pockets of NCR but below 40% in some markets like Chennai and Bangalore.

4. Office lease take-up weak but some green shoots. Take-up across the six major markets of Mumbai, Gurgaon, Bangalore, Hyderabad, Chennai and Kolkata in August 2009 was about 70% lower vs. August 2008. However, the trajectory in Mumbai and Bangalore has improved since
March and it remains to be seen whether there is a significant pick up in 2010 with higher corporate budgets.

5. Execution ramp-up: We visited some DLF and Unitech sites recently and while work is underway on a number of sites, some developers may need to deliver north of 10 mn sq ft pa if demand for affordable housing units is robust over the coming months. Execution of this scale would be more than what they have done in the past.

6. Channel checks indicate investor-driven residential demand, yet to see significant pick-up in office market: Our channel checks in NCR and Chennai indicate that property investors have been quite active over the past six months with regard to take-up of new launches. Brokers we spoke with also indicated that the office market has not witnessed a significant pick-up in volume, especially in Gurgaon and Chennai.

To read the full report: REAL ESTATE DEVELOPERS