FOREWORD A prime reason for dampened transaction activity in real estate markets is the mismatch between consumer expectation and the available supply. Can the supply be better aligned with consumer preference to break this logjam in the residential real estate market? In this first edition of the fifth year of PropIndex, we take a closer look at consumer preference on various parameters for each city covered in the study. The insight gained from this consumer analysis can assist in better positioning of projects and lead to better transaction activity in the market. For example, about 60% of consumer preference is for budget segments in the sub Rs 70 Lakh range. Even within this range, 62% preference is in the sub Rs 50 Lakh budget segment. Further, 41% of consumer preference is for 2BHK formats. Therefore, one solution for overcoming the high capital value(s) (Rs/sq ft) can be to develop smaller and smarter formats in the 2BHK category. This can address affordability issues by keeping the overall acquisition cost low for consumers. Developers at present seem to be focusing on introducing larger 3BHK category to increase per unit revenue with smaller inventory to sell. Such mismatch between supply and demand is leading to increase in stock of unsold inventory. Some of the other aspects which the study highlights are top preferred localities for each budget segment, top preferred budget range for 3BHK and 2BHK formats, associated top localities and more. We’ve also attempted a deeper dive into an analysis of consumer preference in a select locality within each city. PropIndex has access to data on >10,000 such localities across the country. For these localities, we’ve fleshed out the demand parameters on the basis of budgets, BHK preferences and more. Coming to PropIndex for Apr-Jun 2015 quarter, in line with the tepid activity in the market, the National Property Index witnessed marginal increment. This increment was on account of increase in supply accompanied by marginal increase in capital values. Whereas Bengaluru had the highest appreciation in the City Index at 6%, Delhi saw the biggest decline of 3%. Overall, cities in the west and south saw an appreciation in respective City Index values while north saw a decline. The City Price Monitor also witnessed a similar trend with Bengaluru and Delhi at opposite ends of the spectrum. The movement in their City Price Monitor was 3% and -5%, respectively. The rental market was also fairly stagnant. These are changing times and we would love to hear from you. Do write to us at [email protected] and share yours views on this report and how we could make PropIndex even better. You may also share your opinion with #PropIndex on our Twitter handle @magicbricks or connect with us on Facebook at www.facebook.com/ magicbricksTOI. Sudhir Pai CEO, Magicbricks.com METHODOLOGY Introduction larger sized 3BHK category tends to have an website. “Magicbricks has over 12.00,000 overall higher acquisition cost. Large active properties posted by more than This edition of PropIndex is a departure from percentage of consumers preferring 2BHK 2 Lakh active users in 585+ cities and the earlier ones as instead of looking at the category is indicative of price sensitive 17,000+ localities. Our users include demand-supply analysis at the zonal level consumers making efforts to keep the owners, agents and developers.” for each city, it takes an in-depth look at the overall acquisition cost low. Consumer Preference in each city across various parameters. The supply for each city l Consumer preference in the 2 & 3BHK Methodology is captured in the macro level analysis of the categories: This is a micro-level analysis of the two most preferred BHK categories in Apartment values are based on listings on listings data to arrive at the nature and the Magicbricks site. quantum of supply and price movement. the country. Here we look at the most preferred localities and budget segments for These include multi-storey apartments and The Magicbricks PropIndex is the same as each category. In addition, we also identify single units on plotted developments, carried in the previous editions of PropIndex. the top preferred localities for each budget referred to as builder floors on Consumer Preference Analysis segment. This information helps to Magicbricks.com. The objective of Consumer Preference understand the BHK category which a The Index is structured in such a way that Analysis is to identify the nuances of consumer associates with each budget individual properties are aggregated into demand across pertinent parameters to segment in a given locality. The residential their respective cities and then to the arrive at a holistic picture of what consumers projects can be positioned accordingly in National Index. Weightages for PropIndex want in each city. Consumer Preference terms of price points and BHK formats. This are based on the supply of properties within Analysis is based on the analysis of search analysis has been done separately for 2BHK the locality/city. Based on this structure, undertaken by consumers on and 3BHK categories. PropIndex gives a realistic picture of trends Magicbricks.com. The parameters on which l Top 10 localities by consumer preference: in price/supply across different property this analysis has been done are: Here we identify the top 10 preferred markets. We have used different weightages localities by consumers for each city and for Listed Price Monitor/Rent Monitor. l Distribution of consumer preference by budget: This gives an assessment of the top their share of consumer preference. A high Therefore, PropIndex along with tables preferred budget segments to acquire percentage share indicates the consumer provided for Listed Price Monitor, Rent residential real estate in the city. It gives an preference is spread across lower number of Monitor, Yield Monitor and Capital Values, overall picture of the consumer profile for localities and vise-versa. gives an excellent perspective of the that city and helps to understand the nature l Locality level analysis: In addition to the property market performance in the quarter. of demand. macro-analysis to understand consumer While listing sand their values/supply preference at city level, a further granular provide a level of understanding of the l Top Preferred localities by budget segment: It helps to understand the top analysis has been undertaken at the locality market, there are meticulous data checks to localities which people associate with each level. This has been done for one locality per prevent aberrations creeping in. These are budget segment. This also gives the city where the top preferred locality has based on statistical calculations, industry localities in which people are searching for been subjected to this analysis. inputs and logical interpretations. residential options in a particular budget The objective of locality level analysis is to The National Property Index (NPI) is range. It gives the geographical spread of understand consumer behavior at the indicative of the extent of activity as well as consumer preference by budget. Further, it micro-level and identify the main attributes price movements across cities and localities also helps to assess the dominant budget which consumers associate with a locality. in the major active cities on segment(s) associated with each locality. The parameter under which analysis has Magicbricks.com. The index includes the top Residential projects can be accordingly been undertaken is a sub-set of what has 11 cities, chosen based on their activity positioned in these localities. been done at the city level. This involves levels, has an individual city report for each. aspects like preferred residential type, BHK While the NPI and its movement is of l Share of the top localities in each budget segment: We evaluate the percentage share and budget preference and preference under interest to the expert community of bankers, of the top 5, 10 and 15 localities for each 2BHK & 3BHK categories. builders and investors, the PropIndex has budget segment. This analysis helps to also taken care to explain the nuances of the identify the geographical spread of Magicbricks PropIndex index movements at the locality level that consumer preference in the city. A high would help the huge data base of percentage share means consumers are Magicbricks PropIndex is a tool which Magicbricks.com consumers. looking for options in fewer localities while empowers property seekers and investors The PropIndex is the result of meticulous the opposite means the consumer with detailed information on the movement research at the locality level and through preference is more wide spread. of residential apartment prices and supply of detailed discussions with experts at properties in India. No credible property Magicbricks.com’s offline and online l Consumer preference by BHK categories: index can be a function of direct values as We look at the consumer preference by BHK initiatives. The Indian real estate market is the changes are governed by multiple dynamic and the PropIndex reflects those (Bedroom-Hall-Kitchen) category. This factors. Magicbricks PropIndex has taken relative percentage split across various BHK changes. Since it is derived from a dynamic this reality into account and produced an database, additions and deletions of categories gives an impression about the index based on listings of apartments and overall affluence of the consumers. The localities happen as a function of changing their capital and rental values on the market dynamics. GLOSSARY & DEFINITIONS There is a wealth of information within these pages. For better readability, we have presented some data as tables and others as graphs. Between them, you will find how property markets have performed in the Apr-Jun 2015 quarter from different perspectives – from that of capital appreciation, from a rental/yield realisation perspective and from a supply standpoint.