Category
🗞
NewsTranscript
00:00The upcycle in real estate continues unabated and an interesting report from Anaroc points
00:14out how prices seem to have also caught up and boosted.
00:19Now the question is that with prices going up and this report says that in the MMR region
00:26and the NCR region you have nearly 50% jump in prices in residential real estate in the
00:32last five years.
00:33Now the question is, is that putting off or dampening spirits of buyers or is it still
00:39going very strong?
00:40To get a clear picture of what's happening in the real estate industry at a time when
00:44all the stocks are in focus, I'm joined by Anuj Puri of Anaroc.
00:48Anuj, great to speak with you as always and have you on Indy TV Profit.
00:54Let's begin with the key takeaways or the pointers of your report, which is very interesting.
00:59So this 50% jump in NCR and MMR, has the bulk of it come in the last couple of years where
01:07we've really seen the upcycle?
01:09First of all, Navanna, always a pleasure to be on your show and it's very nice to interact
01:14with you.
01:15Thank you for having me.
01:16There is a huge amount of positive momentum that continues within the real estate.
01:22So I'll give you a little bit of background before we get on to the prices so that your
01:27viewers can appreciate why these prices are rising.
01:31The first is that on the sales side, every year we've seen the best ever and more and
01:38more records are being broken.
01:40Q1 of this financial year, April to June 2024, again, we have seen is the best ever quarter,
01:48which has shown on a very large base compared to last April to June of 2023, a growth of 5%.
01:59Second is we're seeing that the unsold inventory is coming down rapidly across the board.
02:07Third, we're starting to see price rise happen and in the last 24 months, absolutely correct,
02:14a lot more because a lot of the inventory is getting completed.
02:19And as this inventory is getting completed, the prices are going up by their developers
02:24because there's financial closure on all these inventories.
02:30And this is perhaps just the profit of the developer left in there.
02:35I must put an asterisk on this and say is in the years from 2012 to really 2019 pre-COVID,
02:45the price rise hadn't really happened.
02:47So seven years before COVID, the price rise hadn't really happened.
02:52The price rise that we are now seeing in the last five years is literally a catch up that
02:58is happening for the period from 2012 to 2019 when price rise didn't happen.
03:04So whilst, yes, 50% prices have gone up in NCR and in MMR over the last five years,
03:10but actually you should look at it more from 2012 to 2024.
03:15And then one will appreciate that the price hasn't really gone up given that the income levels
03:19have gone up much faster than the real estate prices.
03:23Yeah.
03:24No, so that's a good point, Anuj, because I was speaking today with a real estate company
03:28who made a similar point that if you look at it, at least NCR over the last decade,
03:33then prices have just pretty much been at inflationary levels.
03:37So now that the catch up has happened and as you describe it, it's a price catch up.
03:42How much more is the question?
03:44Because demand seems to be there, especially in certain segments.
03:48I wouldn't say so much in affordable housing.
03:51The input cost component continues to increase as well.
03:55Do you see a trajectory of price rises, at least in residential real estate continuing?
04:01I do see that the price rise will happen, but it will be in line with the inflation.
04:07I don't think this is yet a game for investors or speculators to come in and say,
04:12we're going to make a ton of money with the price rise that is going to happen.
04:16I think it will be more in the range of 5% to 7% that you will see.
04:21And that will be largely because of your input cost that the developer is going to pass it on
04:26to the home buyer, to the consumer.
04:29And that is how I feel across the board.
04:31You will see across the cities as well, a 5% to 7% rise in the price over the next 12 months.
04:37Having said this, Tamana, there will be some projects where, as I earlier said,
04:43is that the financial closure has happened through the sales.
04:46What it means is that maybe 50%, 60% of the project has been sold.
04:51And the balance, you know, 40 odd percent is the pure profit of the developer.
04:57So even if the project sales flow down, it doesn't matter to the developer.
05:01They may maximize by increasing the price.
05:04But until such time that the financial closure through the sales doesn't happen,
05:09majority of the developers will be focused on the sales velocity
05:13and not necessarily increasing the prices and breaking the cycle.
05:18So talking about that sales velocity factor, because that's the other side of the coin, isn't it, Anuj?
05:23And I was going through your report.
05:25While prices have increased, so has unsold inventory and the most in NCR region.
05:32Now we're seeing the pace of new launches is frenetic, for lack of a better word.
05:41And there are more and more in the pipeline,
05:43expanding even beyond these two key markets that we've been talking about.
05:48Do you see that as a concern going forward as the unsold inventory builds up?
05:53Not as much, Tamanna.
05:54There is a fair amount of appetite for the unsold inventory to really go up.
05:59You know, we are at a 14 month low.
06:02You know, pre-COVID, we were between 22 to 26 months.
06:07So, you know, we are at a 14 month.
06:09If anything, I actually do want the unsold inventory to go up
06:13because that then keeps the harmony between demand and supply.
06:17If the unsold inventory starts to go below 14 months,
06:22then the market really tilts towards the developers.
06:26And that is when you can start to see a lot of increase in the prices
06:30because then really, you know, supply is much more limited compared to the demand.
06:36So I do hope that there is more inventory that comes up
06:40and perhaps the supply is more than the demand so that the unsold inventory,
06:45usually I've found over the last couple of decades
06:47that between 18 to 20 months is the right equilibrium
06:52where the demand and supply really, you know, the curve meets
06:55and you don't see too much of price rise happen.
06:59So that's what my take is.
07:00Within that as well, Tamanna, I would say some of the markets,
07:04you know, are really starved for the inventory.
07:10Some of the markets we are seeing a bit of an oversupply
07:14from the 14 month being built up.
07:16But I would say it's not a matter of huge concern
07:20that we are starting to see too much of overhang of unsold inventory.
07:24Yeah, but speaking specifically about NCR,
07:27because, you know, that's in focus and a lot of launches there as well,
07:31there you're seeing an inventory buildup of 28 months?
07:35So it is, but, you know, Tamanna, over a period of time,
07:39we've seen much of what is written on the paper actually doesn't come up
07:44within the timelines that has been indicated.
07:46So it does evenly support it and does bring it down over a period of time.
07:53You know, so 28 months, I would say will be more like 2021 months.
07:58By the time this actual inventory starts to come physically,
08:02you know, in the market for its sale.
08:07So I would put in a bit of a sort of caveat to that is to say
08:13on paper, you may start to see in that city an oversupply situation,
08:19but in actual practice, by the time that supply will come in,
08:23it does get delayed and by that time the demand catches up.
08:27OK, I just want to get your sense of what the picture is like
08:32beyond NCR and beyond MMR,
08:35because another very interesting market which has been dynamic is Bangalore, right?
08:40Your South markets are also growing immensely.
08:43And what is the picture there in terms of both price rises and unsold inventory?
08:50So, you know, Bangalore has been a very stable market right throughout,
08:53not only, you know, post-COVID, but even before COVID,
08:57it is a very solid, stable, very mature market.
09:00You know, to an extent, I would put it higher than NCR and MMR as well.
09:05You know, the quality of developers, the quality of the product that comes out,
09:09the stability of the prices, the employment that gets generated
09:14through a lot more cosmopolitan workforce within Bangalore,
09:18lends itself to a very sort of stabilised residential sales.
09:25So whilst in Bangalore also the price rise has happened,
09:29but the price rise is not in terms of sort of rupees
09:34as much as what you're seeing in NCR and MMR,
09:38where already the prices were high.
09:41So as a percentage, when you add on to it,
09:44the total value of the product does become that much more expensive.
09:48In Bangalore, the prices, you know, still largely range between,
09:51I would say is 8,500 to 12,000 or 13,000 rupees a square foot.
09:58In a place like MMR, I mean, in that price,
10:00you'll probably get in Kalyan, Dombivili, you know, that sort of a thing.
10:04Whilst in Bangalore, you will get in a lot more upmarket,
10:09of very mature developers in 8,500 to sort of 12,000, 13,000 rupees.
10:16What market does in Southern India does concern me a little bit,
10:23is Hyderabad, you know, I do see is on the office side,
10:29a lot more supply, perhaps to an extent of oversupply
10:34that is getting built up in Hyderabad.
10:37And equally on the way the land sales are happening for residential,
10:44I do feel is that there is a huge amount of capital appreciation in the land,
10:49which I don't know ultimately whether the home buyer will be able to absorb
10:56that increase in the land price that has been very quickly happening
11:00quarter on quarter in the Hyderabad market.
11:04Transcribed by https://otter.ai