Residential property prices in Panvel have grown 30-50% since March 2010. Our channel checks suggest volumes during the past three months are down 30-40% for most large developers. Developers’ unwillingness to cut prices is exacerbating the weak demand scenario. This, in our view, will sustain the weak volume growth over the next 6-12 months, and thereby business uncertainty.
The competitive pricing scenario has altered business dynamics substantially. Kalpataru Riverside (project by Kalpataru Group) has witnessed 29% price growth (current pricing INR4,400 psf) since the cyclical low in March 2010, while Indiabulls Green (project by Indiabulls Real Estate) has witnessed 39% price growth (current pricing INR3,050 psf) since its launch in 3QCY09 at INR2,300 psf. Comparatively Hirco’s Panvel project has witnessed price growth of only 7% (current pricing INR3,850 psf) on weak volumes.
Hirco has an ambitious plan of developing an estimated 84m sq ft (excluding independent development) over the next 8-10 years. Current projects are in the fast-growing city suburbs of Chennai (near the growth corridor of Sriperumbudur) and Mumbai (Panvel, near the planned new international airport for Mumbai). While most Indian developers are following an integrated township development model similar to Hirco’s, few have experience of this scale over a long development timeline. We believe the Hiranandani Group’s experience in operating such a model will benefit Hirco over the long term.
