Luxury housing in Mumbai resurgent; NCR market regaining momentum

Various steps taken by the Central and state governments such as relaxation in stamp duties, initiatives to boost affordable housing and easing of COVID restrictions have propelled growth in the domestic real estate sector.

Additionally, the affordability is at its highest in over a decade as the home loan interest rates are at a record low after sustained intervention from the Reserve Bank of India (RBI).

Axis Bank says residential demand strong, interest rates on home loans at record low

Meanwhile, the luxury real estate segment which was seeing muted demand pre-COVID, also witnessed a flurry of transactions in 2HFY21, like the rest of the residential segments, according to Antique Stock Broking.

The momentum of 2HFY21, which was disrupted due to the second wave of COVID19 in April/May, is likely to continue in 2HFY22, provided that there are no further lockdowns.

The overall outlook for both premium/mid-income in the medium term looks positive in the wake of the strong underlying trend in residential real estate, the brokerage house said in a research note.

In India, Central Mumbai as a key real estate micro-market predominantly comprises Lower Parel, Prabhadevi, Worli and Mahalaxmi, and represents the premium/upscale micro-market of Mumbai Metropolitan Region (MMR) in terms of sales.

“Proximity to business districts in BKC and Lower Parel, have made areas such as Worli, Lower Parel and Prabhadevi sought-after destinations with many projects launched in these micro-markets. Although, these micro-markets has 20-25 percent of the total inventory (in sqft) but value-wise it constitutes more than 40 percent of the total inventory of Mumbai,” the report said.

In the Northern region, the NCR market shows that inventory problems are likely overstated, while, volumes are a fraction of the past and a developer shakeout has already happened.

This provides potentially large gains for better quality developers ahead, Jefferies said.

“The good performance of Delhi city registrations and NCR sales for listed developers makes us believe that the cyclical NCR market is gathering pace. Volumes in NCR / Gurgaon (Tr-12 mth basis) are less than half those seen in the previous (pre-2013) cycle,” the global brokerage said.

NCR market has gone through significant stress with several leading developers of the previous cycles no longer active. By sales value, DLF continues to be the market leader in Gurgaon. Godrej Properties is now among the top three in both Gurgaon and Noida markets. Several national developers have projects in NCR with Sobha, Mahindra Life, Indiabulls Read Estate, Birla Estates and Prestige among them.

“We note that the data improvement during Jul-Aug has come despite weak seasonality; with festive season impact to be seen in 3Q. Also, as launches continue to trail sales; inventory levels further declined in July and are at 7-8 year lows on the basis of Trailing sales/area for sale basis. This can induce price hikes in the months ahead,” Jefferies said.

The brokerage believes DLF, Godrej Properties and Sobha are well-placed to benefit as the NCR cycle kicks into a higher gear.