Jul-Sep 2015), We Look at the Price Trends Across Major Cities

FOREWORD The Indian real estate sector is at crossroads today. The real estate markets across all the major cities have been stagnant with low transaction activity. The market is saddled with large unsold inventory which at current rate of sales velocity will take more than four years to clear. Amidst this environment, there have been repeated calls for reduction in the prices of residential assets. Market watchers believe that only rationalization in prices can break this logjam and lead to more transaction activity. But what are the current price levels? And how much room does a developer have to reduce prices? In our current edition of PropIndex (Jul-Sep 2015), we look at the price trends across major cities. As different budget segments have unique demand-supply scenario, we’ve divided the capital value (Rs/sq ft) range in each city into eight budget segments. The trend analysis has been done on a Q-on-Q basis for a two year period between Jul-Sep 2013 and Jul-Sep 2015. Our analysis shows that prices across different budget segments in each city have remained stagnant over the evaluation period. Comparing the cities basis their weighted average price movement over the two year period shows that except for Pune and Chennai, none of the cities have even managed to get a double digit growth. Even in case of these two cities, the price increment has been 11.8% and 10.8%, respectively. Delhi was the worst performer with a net decline of 14.8%. Big mid-segment real estate markets like Bengaluru and Noida saw 7.6% and 3.2% price increment. However, when these marginal increments in prices are adjusted for inflation, we find that the net movement in prices is either zero or even negative. This stagnation in the market is reflected in the Jul-Sep 2015 National PropIndex which remained at the same level as the previous quarter. In case of individual cities, Bengaluru again witnessed the maximum appreciation of 4% while Delhi declined further by 5%. Western cities of Pune, Mumbai and Ahmedabad all witnessed positive movement in their city indices. Today, the developers understand the requirement of easing acquisition cost for consumers. Towards this end, they have come up with various attractive payment plans like subvention schemes where EMI till possession is paid by the developer or possession linked payment plans. Apart from this, they are also offering freebies and discounts. When the financial saving from these payment plans or freebies/discounts are factored, it translates into 5%-15% saving to the consumer. With RBI easing policy rates and attendant reduction in home loan rates, the developer community expects that the combination of lower interest rates and freebies/discounts will get the fence sitters to take the leap. Therefore, in short to medium term, we do not expect developers to take the drastic step of upfront reduction in capital values. They are more likely to persist with discount and freebies to pass lower cost to consumers. An upfront reduction in prices may send strong negative signals and have a domino effect. Consumers may start to hold their purchase decision expecting prices to fall further. 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. Sudhir Pai CEO, Magicbricks.com METHODOLOGY Magicbricks PropIndex are aggregated into their been chosen based on respective cities and their activity levels) and Magicbricks PropIndex then to the National has an individual city is a tool which Index. Weightages for report for each of these empowers property PropIndex are based on cities. While the NPI and seekers and investors the supply of properties its movements are of with detailed within the locality/city. interest to the expert information on the Based on this structure, community of bankers, movement of residential PropIndex gives a builders and investors, apartment prices and realistic picture of the PropIndex has also supply of properties in trends in price/supply taken care to explain the India. No credible across different property nuances of index property index can be a markets in each city. We movements at the function of direct values have used different locality level that would as the changes are weightages for Listed help the huge base of governed by multiple Price Monitor/Rent Magicbricks.com factors. Monitor. Therefore, read consumers. as a whole, PropIndex Magicbricks PropIndex Insights into consumer along with tables has taken this reality demand have been provided for Listed Price into account and gathered through Monitor, Rent Monitor, produced an index based analysis of search Yield Monitor and on listing of apartments information on the site. Capital Values, gives an and their capital and This helps understand excellent perspective of rental values on the the best localities by the property market website. demand, the type and performance in the configuration of units as “Magicbricks has over quarter. 12,00,000 active well as the budget-wise properties posted by While listing and its preferences. values/supply provide a more than 2.5 Lac active The PropIndex is the level of understanding users in 600+ cities and result of meticulous of the market, there are 17,000+ localities. Our research at the locality meticulous data checks users include owners, level and through to prevent aberrations agents and developers.” detailed discussions creeping in the Index. with experts at These are based on Magicbricks.com’s Methodology statistical calculations, offline and online industry inputs and Apartment values are initiatives. based on listings on logical interpretations. The Indian real estate Magicbricks. These The National Property market is dynamic and include multi-storey Index (NPI) is indicative the PropIndex reflects apartments and single of the extent of activity those changes. Since it is units on plotted as well as price derived from a dynamic developments, referred movements across cities database, additions and to as builder floors on and localities in the deletions of localities Magicbricks.com. major cities active on happen as a function of Magicbricks.com. The The Index is structured market dynamics. in such a way that index includes the top individual properties 11 cities (these have 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. Demand Analysis section also explains what consumers look for. We recommend that you evaluate the city report in its entirety and that will provide a rounded perspective of the performance of the property market within each city. Here are the details of what you will find in each of the city reports enclosed within: 1. City Property Index – This is a composite index which is a function of supply of properties as well as the average capital appreciation/drop in various localities of the city in the quarter. The City Index is the weighted average of the average rate per square foot in that locality and the supply of properties from that locality. Premium localities (with higher average rate per square foot) as well as localities with higher supply of properties will have a bigger impact on the Index. For example, if the supply of properties from a premium locality drops, that locality will end up having a lower weightage in the Index which in turn will push the Index downwards (and vice-versa). On the other hand, supply of properties remaining unchanged, the Index will be influenced by capital appreciation within the locality. 2. Listed Price Monitor – This metric shows the capital appreciation/drop within a locality and is calculated on the basis of movement in the “average rate per square foot” within that locality. By and large, the movement in the “average rate per square foot” reflects capital appreciation/drop. However, in a few select cases, we have observed that the average rate per square foot moves due to a change in the mix of apartments within that locality (e.g. if the ratio of premium apartments, which command a higher per square foot rate, changes over the quarter). In these few circumstances, the Listed Price Monitor will, in turn, reflect this input. Such changes have been explained in the text of the City Reports. 3. Rent Monitor – This reflects the rental appreciation/drop within a locality. It is calculated on the basis of movement in the “average rent per square foot” within that locality. By and large, the movement in the “average rent per square foot” reflects rental appreciation/drop. However, in a few select cases, we have observed that the average rent per square foot moves due to a change in the mix of apartments within that locality (e.g. if the ratio of premium apartments, which command a higher per square foot rent, changes over the quarter). In these few circumstances, the Rent Monitor will, in turn, reflect this input. Such changes have been explained in the text of the City Reports. 4. Yield Meter – Yield is the annual rate of return earned on property. The Yield Meter depicts the gross yield percentages across various localities. Gross yield is a ratio of average annual rental value to the average capital value of the property. 5. Capital Value Tables (given in Annexures) –This shows the actual range of prices within which properties were available in each locality in the quarter.

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