FOREWORD This has been one of the more interesting quarters in the residential real estate market. Data indicates that markets are looking for a sense of direction. Weak sentiment because of economic factors as well as the upcoming elections has dampened investor enthusiasm. However, this is the first time that the end user has shed inhibitions and got into the driver’s seat in the residential property market. Read this quarter’s PropIndex analysis along with the Housing Sentiment Index (HSI). The HSI has been jointly released by Magicbricks and Indian Institute of Management, Bangalore. The first of its kind in the market, the HSI tracks property buyer sentiment across the country by way of detailed questionnaires. It clearly indicates that while the consumer is willing to wait in anticipation of better prices, he is also quite willing to search for the best deals over the next six months. The number of enquiries indicate strong underlying demand. However, with investors shying away due to a slow market, the end user is using this window of six to eight months to explore the markets at length, search for a property of their choice and then negotiate to get a good deal. Both developers and landlords seem more willing to negotiate in an effort to keep up the sales velocity. In a market driven by end users, consumer preferences come into sharper focus. Apartments emerged as the winner with all cities showing robust demand. Smaller units of 1, 2 and 3BHK were preferred over premium, large apartments. However, demand for premium apartments was driven by a small group of buyers who showed that sentiments had nothing to do with this volume of demand. This being a lucrative category, developers seemed to prefer to build more in this category, thereby creating abundant supply. The industry would benefit by using statistics to understand consumer sentiment, and be able to navigate basis the direction that markets are likely to take. The volume of stock in every market, if positioned correctly, can be used to bring back the end user. Unlike 2010, when developers had little to woo the anxious consumer with, this time round, they have plenty of stock and a negotiating power to turn the markets around. The question is, can they take leadership and make Real Estate the sector to kickstart a sagging economy? We hope you benefit from this edition of PropIndex. A complimentary copy of HSI is also included with this report. We would look forward to your feedback – please write in to us at [email protected]. Happy Diwali and best wishes for the festival season. Sudhir Pai Business Head, Magicbricks.com [email protected] 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. 500,000 active properties well as the budget-wise posted by more than While listing and its preferences. values/supply provide a 1,50,000 active users in The PropIndex is the level of understanding 300 cities and 10,000 result of meticulous of the market, there are localities. Our users research at the locality meticulous data checks include owners, agents level and through to prevent aberrations 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 multistorey 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 12 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 Jul-Sep 2013 quarter from different perspectives – from that of capital appreciation, from a rental/yield realisation perspective and from a supply standpoint. Also, Demand Analysis section, 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. Prices are shown in Rupees per square foot basis, these are the prevailing rates for properties in each locality. 6. Demand Analysis – This analysis of consumer demand is based on searches and requirements that users have performed on Magicbricks.com. The top localities by demand gives an insight into consumer peferences. The demand data has been used to arrive at various aspects of consumer requirements including Budget-wise analysis, Property type analysis and BHK configuration analysis. This section also provides a comparison between demand and supply in the Apr-Jun 2013 and Jul-Sep 2013 quarters. 7. Realty News – Property market performance is also dependent on drivers outside the purview of buying and selling. There are broadly four key drivers that determine the prospects of real estate – infrastructure such as water and power, transport links creating new growth corridors, policy such as rental laws, property tax, etc and return on investment.