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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

Sales Velocity To Impact Real Estate Prices? | NDTV Profit

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