>MCHI Property 2010 Expo (CENTRUM)

We attended the property exhibition hosted by the Maharashtra Chamber of Housing Industry (MCHI) in Mumbai. About 75 developers participated and customer interest was strong with ~70,000 visitors thronging the fair. However, affordability continues to suffer with prices having crossed their 2008 peak levels. We reiterate our view that prices could correct 10%- 20% across projects in Mumbai.

■ Strong turnout, but expectations belied: Similar to previous property exhibitions, the recent four-day event (April 8-11) held in Mumbai attracted over 70,000 footfalls. Notwithstanding the higher number of enquiries, the fresh round of price increases of 10%- 15% in April 2010 has had a visible impact on buyer sentiment.

■ Prices in Mumbai have breached the previous peak: Property prices in Mumbai have crossed their 2008 peak levels vs other property markets like the NCR, Bangalore and Chennai, where prices are still 20%-30% below their peak levels of Q1CY08. We view this negatively and expect prices to correct again. We see higher chances of a ‘double dip’ fall of 10%-20% from current levels.

■ Premium housing rules the roost: Developers have renewed focus on premium housing. Only ~20% of the homes were priced below Rs4mn (this segment accounts for over 60% of the potential housing demand in the Mumbai Metropolitan Region). Prices for a 2BHK home outside Mumbai city are now over Rs5mn.

■ Buyer poll reveals expectations of price cuts: Our poll of 100 visitors at the expo reveals that most buyers are waiting for prices to fall by 10%-20% and would take a purchase decision only after six months as they simply cannot afford to buy homes at the exorbitant rates.

■ Prefer HDIL among Mumbai players: We prefer Mumbai-based developers with a diversified business model with less dependence on premium projects. Accordingly, HDIL (Buy, NAV Rs397/share) is our top pick due to its diversified revenue stream and cash flow visibility. We remain cautious on premium players like Orbit Corporation (Hold, NAV Rs295/share) and DB
Realty (Not Rated).

To read the full report: MCHI PROPERTY