Mumbai Real Estate 

Macro stress unabated
November 17, 2011 Kejal Mehta kejalmehta@plindia.com +91-22-66322246 Dhrushil Jhaveri dhrushiljhaveri@plindia.com +91-22-66322232

Sales registrations down 25% YoY at 4,633 RBI indicating a pause in monetary tightening, however, monetary easing in our view is still some time away Group buying website listings indicate a ~10-15% price correction across micro markets mainly in projects that are 3-4 years from completion Lease registrations down 3% MoM to 8,106

Sales continue to languish; macro stress continues  
Sales registrations for the month of October 2011 are down 25% YoY, to 4,633 levels. However on a MoM basis, registrations are up 12% on account of Shraadh falling in the month of Sept (13-27 Sept). Sales registrations have continued to languish at ~4500 levels for the last few months on the back of a worsening macro-economic environment for the real estate sector. Although RBI has indicated a pause in monetary tightening at its latest monetary policy announcement in October, we believe resumption of monetary easing is still some time away. Especially considering the sticky nature of inflation we are currently witnessing. Our channel checks indicate that the festive season has received a tepid response contrary to builder’s expectations of a revival in sales. Thus, a stretched balance sheet, tight liquidity environment and a sharp slowdown in sales are proving to be a triple whammy for developers in the current environment.

BSE Sensex v/s BSE Real Estate 
BSE Realty SENSEX Mumbai (Ex DB Realty)

180 130 80 30

Dec-09

Dec-10

Jun-10

Jun-11

Source: Bloomberg, PL Research 

Also, we are not seeing many deals on the Private Equity front, despite PE being one of the few remaining sources of finance for the sector. This is mainly on account of the high 20-30% IRRs demanded by these funds. In a recent deal, Redfort capital has invested Rs250 cr in Omkar realtor’s slum rehab project in Malad. On the pricing front although we are still not seeing a meaningful reduction in prices, some of the listings on group buying websites are indicating a ~10-15% correction in prices across micro markets. However, these price reductions mainly pertain to projects that are at least 3-4 years from completion. In terms of lease transactions October number stood at 8,106, a growth of 23% YoY, however flat (-3%) on a MoM basis. Lease registrations too have slowed down to ~8000 levels from the 9500+ levels seen in Mar-July 2011.

Sep-09

Sep-10

Aug-08

Aug-09

Aug-10

Aug-11

Oct-08

Oct-09

Oct-10

Apr-09

Apr-10

Feb-09

Feb-10

Dec-08

Dec-09

Dec-10

Feb-11

Apr-11

  Source: DGR Mumbai, PL Research 
Prabhudas Lilladher Pvt. Ltd. and/or its associates (the 'Firm') does and/or seeks to do business with companies covered in its research reports. As a result investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of the report. Investors should consider this report as only a single factor in making their investment decision. Please refer to important disclosures and disclaimers at the end of the report

Oct-11

Jun-09

Jun-10

Jun-11

Stock Performance (%)  1M  Sensex   (1.5)  BSE Real Estate   (8.9)  Ajmera Realty (12.9) Godrej Properties (0.3) HDIL (24.3) Hubtown (5.1) Indiabulls Real Est. (8.5) Oberoi Realty (4.9) Orbit Corporation (12.6) Peninsula Land (8.1) Phoenix Mills (2.5) Sunteck Realty 11.4

Mar-10

Mar-11

Sep-11

6M   (7.5)   (21.8)  (32.6) (2.7) (53.3) (10.6) (41.9) (2.6) (38.1) (31.2) (1.2) 25.9

12M   (15.6)   (49.7)  (57.2) (3.6) (68.4) (60.2) (64.6) (17.3) (71.2) (34.7) (13.9) (43.1)

Exhibit 1:  Trailing 3‐month Sales Registrations in Mumbai 
25,000 23,000 21,000 19,000 17,000 15,000 13,000 11,000 9,000 7,000 5,000

(nos)

Sector Update 

)   10% 20% 30% 40% 0% -30% 100% 50% 0% -50% -20% -10% 150% 200% Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 15% 5% 25% 35% -25% -15% -5% Source: DGR Mumbai. PL Research  Exhibit 3: Trailing 3‐month Leases YoY% growth  10% 10% 11% 12% 10% 12% 13% 15% 18% 17% 21% 15% 15% 13% 11% 0% 5% 6% Exhibit 5: YoY% growth in Sale Deed registrations  Exhibit 7: YoY% growth in Lease Agreement registrations  Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 28% 38% 65% 97% 85% 122% 178% 123% 113% 128% 79% 22% 19% 9% -1% -13% -3% -20% -29% -21% -22% -30% -30% -1% -27% -31% -25% -22% -25% Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 19% 20% 16% 14% 8% 14% 11% 15% 16% Mumbai Real Estate 2 .000 8.000 12.000 - 4.000 - March 17. PL Research  9% 9% 11% 10% 12% 16% 2% 20% 18% 7% 26% 15% 21% 10% 12% 17% 3% -19% 7% 0% 20% 34% 12% 11% 19% 4% 23% 23% 32% Source: DGR Mumbai. PL Research  (YoY gr.000 8.(nos) (nos) 100% 150% 200% 50% 0% -50% 10. 2010 Source: DGR Mumbai. PL Research  Exhibit 2:  Trailing 3‐month YoY% growth  Exhibit 6: Registration of Lease Agreements in Mumbai  Exhibit 4: Registration of Sale Deed agreements in Mumbai  Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 43% 63% 81% 100% 128% 143% 140% 122% 106% 74% 37% 16% 9% -1% -6% -12% -19% -24% -24% -25% -28% -23% -21% -21% -28% -26% -24% Source: DGR Mumbai.000 10.000 2.000 6.) (YoY gr.000 6. PL Research  Source: DGR Mumbai. PL Research  Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Source: DGR Mumbai.000 2.000 4.

 PL Research  Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Exhibit 10: ‘Mumbai Suburb’ Sale Deed Registrations   Exhibit 8: ‘Mumbai Island City’ Sale Deed Registrations   (YoY gr. PL Research  (YoY gr. 2010 (YoY gr.(YoY gr.) 250% 200% 150% 100% 50% 0% -50% -100% 9% -3% -5% 12% 45% 13% 21% 29% 11% 19% 7% 17% -66% 17% 16% 30% -18% 11% -12% 1% 18% -10% 27% 14% -6% 21% -15% 228% Exhibit 11:  ‘Mumbai Suburb’ Lease Agreement Registrations   Exhibit 9:  ‘Mumbai Island City’ Lease Agreement Registrations  Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Mumbai Real Estate 3 . PL Research  Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 23% 36% 2% 10% 10% 8% 6% 23% 31% Source: DGR Mumbai. PL Research  Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 31% 47% 79% 99% 94% 125% 185% 144% 125% 141% 79% 20% 12% 0% -3% -12% -4% -21% -30% -26% -26% -34% -32% -1% -26% -27% -26% -24% -27% Source: DGR Mumbai.) 11% 0% 11% 39% 41% 54% 70% 79% 37% 64% 68% 8% -19% 5% -20% -23% 15% 13% -5% -23% -3% -32% -44% -22% -9% -12% 107% 146% 87% Source: DGR Mumbai.) 40% 30% 20% 10% 0% -10% -20% -30% 0% 11% 9% 13% 12% 12% 12% 7% 19% 16% 28% 17% 22% 24% 12% 17% -20% -1% 10% 36% Source: DGR Mumbai.) 100% 150% 200% 50% 0% -100% -50% 100% 150% 200% 50% 0% -50% March 17.

The suitability or otherwise of any investments will depend upon the recipient's particular circumstances and.4% 19. 570. Mumbai. This material is for informational purposes only and provided to Qualified and Accredited Investors. ("PLI"). in case of doubt. For Clients / Recipients in United States of America:  All materials are furnished courtesy of Direct Access Partners LLC ("DAP") and produced by Prabhudas Lilladher Pvt. We may from time to time solicit or perform investment banking or other services for any company mentioned in this document. statements and opinion given.8% 20.0% Sell   Accumulate  Sell  Trading Sell  Under Review (UR)  : : : : Outperformance to Sensex over 12-months Over 15% underperformance to Sensex over 12-months Over 10% absolute decline in 1-month Rating likely to change shortly  PL’s Recommendation Nomenclature  BUY   Reduce  Trading Buy  Not Rated (NR)  :  : : : Over 15% Outperformance to Sensex over 12-months Underperformance to Sensex over 12-months Over 10% absolute upside in 1-month No specific call on the stock This document has been prepared by the Research Division of Prabhudas Lilladher Pvt. The information contained in this report has been obtained from sources that are considered to be reliable. Ltd. Any questions should be directed to Gerard Visci at DAP at 212. Worli. India Tel: (91 22) 6632 2222 Fax: (91 22) 6632 2209 Rating Distribution of Research Coverage    70% 60% % of Total Coverage 50% 40% 30% 20% 10% 0% Buy Accumulate Reduce   57. make market. Ltd. Either PL or its affiliates or its directors or its employees or its representatives or its clients or their relatives may have position(s). made available or expressed herein or for any omission therein. act as principal or engage in transactions of securities of companies referred to in this report and they may have used the research material prior to publication. PL has not independently verified the accuracy or completeness of the same. Recipients of this report should be aware that past performance is not necessarily a guide to future performance and value of investments can go down as well. you are prohibited from using the information for any reason or purpose outside its intended use. Marg. This document is not to be reported or copied or made available to others without prior permission of PL. 3rd Floor.7% 2. Sadhana House. You are under no obligation to DAP or PLI for the information provided herein unless agreed to by all of the parties. Ltd. its directors or its employees accept any responsibility of whatsoever nature for the information. 2010 4 . India (PL) and is meant for use by the recipient only as information and is not for circulation. It should not be considered or taken as an offer to sell or a solicitation to buy or sell any security. B. March 17. Additionally. However.8888. P.850. Neither PL nor any of its affiliates.Mumbai Real Estate Prabhudas Lilladher Pvt. Mumbai-400 018. advice should be sought from an independent expert/advisor.