Property prices in Mumbai

According to few reports, property prices will remain high in certain market conditions, but they will not increase any more. The value of under construction property which is unsold in real estate inventory in Mumbai can be anything as its R 53,400 crore for a clutch of listed firms and it presents that consumer confidence isn’t exactly soaring. What can be worse with an additional R36,800 crore of launches in the area of 20.4 million sq ft, which is more than half of south central part of the city and it can put the prices of real estate industry under pressure.

According to Niranjan Hiranandani, co-founder of Hiranandani Developers, in real estate market pricing strategy is now crucial since only relatively affordable projects are able to find takers whereas; high end properties in the central and southern parts of the city aren’t seeing any specific interest. Ghulam Zia Executive Director of  Knight Frank India, stated that first-time home buyers continued to sit on the fence however in recent budget there are no incentives for home buyers the market will get revitalized only once the RBI (Reserve Bank of India) begins to cut interest rates.

Analysis of Kotak Institutional Equities (KIE):

According to analysis of Kotak Institutional Equities (KIE) the numbers are clearly indicating that says land buying has dropped and prices are not going so up as only there are four or five developers have the capacity to buy land worth more than $200 million. The analysis showed that Oberoi Realty, Peninsula Land, Sunteck Realty, Godrej Properties, HDIL, DB Realty and Indiabulls real estate are among those property developers who are sitting on high inventories and major part of those inventories belongs from Lower Parel, Worli, south and central pockets of Mumbai and Prabhadevi.

Ambar Maheshwari, CEO of Indiabulls Group also believes that there is a glut at the premium and high ends of the real estate market. The more he added that a recovery is unlikely in areas like Lower Parel and Prabhadevi unless developers build smaller apartments that result in some kind of rationalization in prices. In present Oberoi Realty is targeting on the sales of unsold inventory and they are expecting to sale it in next 12 months, but KIE expects the company will only be able to sell R8,500 crore worth of residences in the next 30 months. As per the data issued by the Director General of Mumbai, in the first 11 months of 2014, property registrations fell 2.4 per cent.

As per few reports developers are planning to offer discount after definitive interest from buyers and channel checks suggest that large number of units are being sold in the 20:80 schemes which will be without a bank debt burden to and trip abroad for designing apartments however discounts are becoming more evident as real estate developers are also offering absolute discounts to investors and as well as end buyers now. These measures are clearly failing to impress and attract new buyers. In certain real estate market, in certain markets developers are selling 20-30 units in a month while in others they could be selling in 2 to 6 a month. Amit Bhagat, who is CEO & MD, ASK Property, stated that the demand was tepid in the luxury space so any developer who was leveraged might be under pressure.

Demand for housing

While management of the inventory level and rising demand from home buyers may end with the decline in the rates of the property in Mumbai. In Mumbai Metropolitan Region (MMR) the property prices can fall by 20 per cent in next few months. According to recent study conducted by ASK, “The demand of housing in Mumbai Metropolitan Region is expected to increase by 1.20 to 130 lakh units per annum, while property demand in Mumbai is likely to correct by up-to 20 per cent in next few months and the main  reason behind this is large presence of inventory.

The demand for housing or apartments units has been driven by the sectors like; entertainment, media, telecom, finance, jewellery, IT/ITeS, gems and trading industry and it is expected that same will continue in future as well. Amit Bhagat, CEO and MD of ASK Property Investment Advisors stated that, “ Increasing sub- urbanization of the Mumbai region and demographic growth statics indicating that in next 2 to 3 three years there will be requirement of 1.20 lakh to 1.30 lakh housing units. The more he added that, “We are expecting that price will not go up because of balanced demand-supply ratio, while growth corridors are expected to witness rise in demand from end-user. It is expected that there will be 20 per cent correction in the price of real estate in next month.

“The expectations of low interest rates, standardization in approvals and different policy initiatives will provide boost to the real estate sector whereas; the imminent economic growth would result in higher addition of jobs, rising income levels and need for housing” ASK Group CEO and MD Sunil Rohokale said. At the same time, the housing units which meet the end-user budget can be the real challenge for real estate sector. The locations such as; Navi Mumbai, Ghatkopar, Andheri will be the future growth centers because of the infrastructure projects which are coming up in these markets. The availability of scarce land with limited FSI (floor space index) in the island city has compelled residential and commercial development to move north-wards. And various infrastructure projects are coming up in the suburban regions, which are attracting the developers to develop more projects in these markets.