Real estate inventory levels at 7-14 months of sales in March 2010 are now at a threeyear low, or at nearly half the peak levels of 18-30 months in 2Q09. Aggregate stock levels are down 28% to 282 mn sq ft, as the sector witnessed a smart demand pick-up that has outpaced new launches. With developers focusing on cash flows over the past year, the pace of new launches (in cities ex. Noida) has been much slower than absorption, as they have been waiting to exhaust the existing inventory before kick-starting a new launch cycle. With a pickup in volumes and low inventory levels, we see developers accelerating their new project launches over the next 3-6 months. This should assuage investor concerns about volume growth built into management guidance and analyst forecasts.
Property prices have risen by 10% in the past three months and average prices in major centres such as Mumbai, Gurgaon, Bangalore and Kolkata are back to pre-crisis levels. Prices in cities such as Noida, Greater Noida, Chennai and Hyderabad are still 20-35% below their 2008 peaks. While the trend from weighted-average prices may not reflect the true movement of property prices, a study of price trend for specific real estate projects also confirms this trend.
