>INDIA PROPERTY (NOMURA)

The top 6 cities in India have started showing a divergence in terms of demand and pricing. Mumbai is showing stability, while Gurgaon is likely to see an uptick in prices. Bangalore, Chennai and Kolkata could see growth in volumes if prices do not move up. Hyderabad may show a decline in prices as it faces a low demand, high inventory scenario. Noida is witnessing an investor-led boom which may peter out within a year.

In the residential segment, volumes maintained their flattish trend as Feb-Apr 2010 was weak but May 2010 showed a rebound. The lack of volume growth from Mumbai and Gurgaon is understandable given the significant increase in pricing, but lack of volumes in cities such as Chennai, Hyderabad and Kolkata, where prices have not gone up much, is worrying. Kolkata and Chennai started showing some sparks of life in Apr-May 2010 although Hyderabad continued to move down. Bangalore achieved its highest volumes since Aug 2008 in Apr 2010, but May 2010 was a disappointment. With new launches picking up again in the city at reasonable prices, we would expect volumes to move up further. The data from Noida/Greater Noida indicate volumes far higher than they have ever been in the past. We believe that most of the demand is investor-led, especially in projects in the newly set up areas of Noida extension. These apartments could be put back on the market in the future, in our view, and the current strong demand could turn into large future supply.

As expected, post a 35% increase in pricing y-y, volumes in Mumbai have lost their strength, while new launches picked up before the monsoons. Mumbai is unlikely to witness any significant increase in volumes from here although prices may not decline for the next 9 to 12 months. In Gurgaon, inventory has gone down by a large amount and this is likely to lead to pricing increases unless new launches pick up. We have already heard of prices moving up by 10-15% over Jan 2010 levels from our channel checks. Bangalore and Chennai are likely to see volume growth moving up if pricing remains stable, while Kolkata could see some price increases as inventory is moving down while demand is getting stronger.

To read the full report: INDIAN PROPERTY