Buy Property in Mumbai

If you are looking for the best time to buy property and you are looking for the indicators in real estate market such as; price and sales, so you can say that in many cities property market could be head for a revival. As per the reports of RBI, the average prices of residential units have increased by 13.7 percent in 10 major cities of the country in the period of July to September 2015. If we will see the brokers sales reports, so we can easily say that sales in real estate market have got a boost too.

According to one of the most reputed developer, “We are going for the pre-launch of our project because buyers are lined up outside of the office to book a flat. And at this point of movement we are expecting some good sales and price in near future”. According to statement of Sanjay Dutt, MD of Cushman & Wakefield, India, “It doesn’t mean that in near future real estate market will witness a turnaround, but it is expected that the trend will sustain for the next 6 to 8 months and we can call it revival”. The more he added that there are contradictions in the data as there are many launches in real estate market where buyers and investors are frenzy to buy. In past few months office and commercial demand has picked up, which means city is creating new job opportunities and if it will sustain for next few months so there will be a turning point for the industry.

Why it’s good time to buy property?

According to real estate experts, if you are end user, so it’s good time to buy residential property. As per the statement of A S Sivaramakrishnan, Head of Residential Services at CBRE South Asia, “These days smart buyers are already scouting for a property, as these days realtors are still flexible with the demand of buyers”. In Mumbai there are more than 77,000 apartments are in the inventory, as per reports of JLL India and it is expected that it will take 11 to 12 quarters to clear off that inventory against a healthy expected cycle of 5 to 6 quarters, as per the statement of Ashwinder Raj Singh, CEO of Residential Services at JLL India. The more he added that there are chances that developers will not raise up their prices if the sales pick up because it can make buyers uncomfortable.

Apart from that there are some developers in city which are offering flexible payment option with attractive interest rates, but they are aiming to sell houses at little higher price than the rates prevailing in those regions. Ashutosh Limaye, Head of Research at JLL India, Don’t just go by the quoted rate of the flat because developers might offer little lower priced with some additional charges such as; club fee, and fee for other amenities. Apart from checking the track record¸ titles and approvals, its recommended to check the discounts, offers and schemes for different real estate developers before making any kind of purchase, as per the statement of Mudassir Zaidi, National Director of Residential Agency at Knight Frank.

If you are looking for the under-construction flats, so its recommended to take some time and evaluate the projects and ideally buyers should take 30 to 60 days to visit the site and check if the construction is happening as per schedule or not. If there is any kind of deficit, then better to stay away from that project. However; buyers can find the good deal for old flats, which was constructed 5 to 10 years ago. Apart from that if you are at real estate investor, so better to wait and watch for the trends and developments for next two to three quarters.

Housing sell will rise – festive season.

This Dewali, residential property sales may rise up to 15 per cent due to various offers and discounts by real estate developers as there are many real estate developers who are offering 15 to 20 per cent discount through various means. According to real estate experts, this festive season can holds out the hope of Indian real estate market as in major markets the demand from end users are increasing. Experts are estimating the growth of up to 15 per cent and more in residential property sales in comparison of previous year.

According to Chief Executive of one of the Mumbai-based real estate company, “From past one year there was no major price appreciation in real estate market, but this time real estate developers are offering 15 to 20 per cent discounts with an aim to make the net gain of 25 per cent in prices for buyers.” However; price reduction seems to be the most important primary reason for the consumer pull. In comparison of last year, growth in sales should be between 15 to 20 per cent, however; it also depends on the market and it is showing positive curve towards growth, as per the statement of experts, “It’s not time when we should expect the high growth number in comparison of previous boom. But still it’s expected that consecutive years of growth will help the market to recover from deep down phase. And due to that this year we are expecting good numbers”.

As per the statement of Sanjaya Gupta, MD of PNB Housing Finance, “Hyderabad, Pune, Bengaluru and the suburbs of Mumbai had seen increased activity in last few years. Last week were surprised to hear that transactions in south Delhi was high with ten high-end floors being sold. We can say that its harbinger of better sentiment”. Apart from new launches dwindling in major cities such as; Mumbai Metropolitan Region, Bengaluru, Delhi and NCR expecting are high time because most of the real estate developers focusing on clearing inventory with ready-to-move in houses in next 6 to 12 month. It will improve the confidence of buyers or end users accustomed to seeing delivery commitments being flouted. According to PropEquity, a real estate consultancy, the number of new launches in MMR, Bengaluru and Delhi-NCR has come down by over 61 per cent with 87,298 dwelling units during January to September from 227,211 in the same period of 2012.

According to statement of Pankaj Kapoor, MD of Liases Foras, “There would be a significant improvement in sales for this festive season because interest rates had come down and price had not gone up so much and developers are also offering the discounts”. The more he added that over the year’s income of working couples have raised by 10 to 15 per cent, which means affordability has improved in most markets such as; Delhi, Mumbai and NCR. In real estate market the inventory level for first quarter of 2015-2016 was rose by 24 per cent to 41 months in all major eight cities. However; NCR had the inventory of 68 months, MMR had the inventory of 45 months, and Bangalore had the inventory of 30 months, as per the reports of Liases Foras. An efficient housing market maintains 8-12 months of inventory.

It’s clear that Indian realty market has been hit economic slowdown, financial constraints of developers and low sales in last two years. According to Ashutosh Limaye, National Director, Research at JLL India, “This year will be better than the last year”. The plus point in this season is the price and it is attractive for buyers and end users. The more he added that still there is scope for negotiation. The festival season is started from October and it will continue till December, it is expected that 30-40 per cent of total house sales but in last two years very little activity has been recorded during the season.

Commercial real estate

Capital value expectations as well as monthly rentals both have marked growth in September quarter for commercial real estate segment in India, but still its lower than the expected as per the RICS (Royal Institute of Chartered Surveyors), UK based qualifications and standards authority for property, construction and land. Apart from that the Indian commercial property monitor also indicated that maximum number of tenants and investors felt that market valuation for commercial real estate segment is much expensive in comparison of previous quarter. In contrast, the percentage of tenants and investors who felt that price of commercial dipped in third quarter of 2015 was about 30 percent in comparison of earlier quarter.

According to Devina Ghildial, MD, South Asia, RICS, “The commercial property segment in India was always upswing because demand was outstripping supply, but growth in rentals value was modest with its early expectations”. The more she added that in India, there is dearth for grade A office space under commercial segment in major cities because many new MNCs are looking towards more business in India and for that they are looking for more space to set up new office space. In our country existing large business organizations are ramping up their business and operation with solid pace, but the supply of grade A office space is not able to match up to this demand, leading to healthy appreciation. As per the records of property price cycle of commercial segment, a large group of segment (about 38.3 per cent) feeling that its in establishment phase. Apart from that percentage who believed that it is in early uptrend phases, is about 27.2 per cent. And almost equal percentage, which is about 24.7 per cent, felt that commercial property segment was in mid-downturn stage, but only 6.2 per cent felt that it is in mid-upturn phase, whereas; 1.2 per cent felt it had peak stage.

According to recent reports, there was a spurt in the demand in Indian real estate sector and when it comes to commercial property because auto, IT and e-commerce start-ups, telecom, banking financial services and insurance (BFSI), consumer durables, fast moving consumer goods (FMCG) sectors are looking for more space to enhance their business and operation in premium cities such as; Bangalore, Mumbai, Delhi and National Capital Region (NCR) and these cities have witnessed several large-sized transactions during the quarter.

According to Ashutosh Limaye, Head of Research & Real estate intelligence service, JLL India stated that “In India commercial properties are more affordable in comparison of other countries and apart from that rentals in our country have bottomed out and making its way up. The more he added that rise in rental was gentle, but the direction was definitely up and rentals in real estate’s commercial segment is fair and competitive, but it’s still below the previous peak of 2008. Metro cities like; Bangalore was one of the few market which has reached its peak in the year 2008 while real estate sector in other cities remained more than 10 per cent below it, whereas; Chennai was 2 per cent below its peak and Pune was at 10 per cent while rest were over 10 per cent lower than their peak. In 2008, the price was high as Rs400 per square feet (sq ft) in the cities Mumbai and Delhi. In present, Nariman Point is 30 per cent lower than commercial property rental values of 2008 while other suburbs areas such as; Kurla and Andheri is 20 per cent lower.

According to J C Sharma, MD of Sobha Developers, India offered arbitrage in two things; one office rentals and second salaries or wages. The more he added that MNCs came to India because of these two arbitrages, which is competitive in comparison of global market. The more he added that if you will include the market of the Bandra Kurla Complex (BKC), Mumbai and Delhi, so its 90 to 95 per cent of the totals transactions in the India’s commercial property segment and it is very affordable in comparison of emerging global market such as; Southeast Asian countries such as; Jakarta, Bangkok and Malaysia.

Image Credits : DNA

Recently, Abbott India Ltd. has closed a deal of Rs 1,400 crore in Mumbai, where Abbott has bought 500,000 sq. ft. commercial space and it is one of the largest commercial real estate deal in present time, as per the real estate experts who are familiar with the real estate transaction. This deal is clear example that demand for commercial space in Mumbai is increasing and its IT companies, Pharma firms and Start-ups which are looking for commercial space.

Abbott India Ltd. which is one of the fastest growing pharmaceutical firm has brought the space for office at Godrej  BKC in Mumbai’s BKC  (Bandra Kurla Complex). The real estate market in Mumbai has seen a positive shift in last two years and when it comes to commercial property, so we can say that it has seen a pick-up over past year because demand for commercial space and office space from IT, pharmaceutical firms, multinational and start-ups has risen. However; it is well known fact in present the level of unsold inventories for residential market is risen for major markets in Mumbai and deal of Abbott has clearly reflects that there is little pick-up in commercial properties. According to real estate experts it was phenomenal deal because it was a  single-cheque transaction and its well-known fact that Pharmaceutical companies never prefer to spend this much money on property or real estate, especially at BKC where commercial property is expensive and where Banks and financial organizations prefer to set-up their headquarters, as per unknown sources who declined to be identified  because it was not a public deal.

However; according to another person, the deal had been clinched in the month of Sep 2015, and till now it was subject to approvals, whereas; Cushman & Wakefield, a global real estate consultancy was advisor to the deal, but Cushman & Wakefield has declined to comment on the deal. Apart from that an Abbott spokesperson also stated that we don’t have any comment to share on this matter. Godrej BKC  is about to come up with 19-storey commercial project in same region and it will be developed by Jet Airways (India) Ltd. and Godrej Properties Ltd (GPL). However; previously in 2011 Godrej Properties had acquired the construction and development rights from Jet Airways to build the property. And the spokesperson from Godrej Properties stated that he don’t want to comment on the matter. In past two to five years, BKC has emerged as one of the most prime commercial hubs in Mumbai and due to that the average price for commercial property at BKC region ranges between Rs.20,000 and Rs.34,000 per sq.ft., however; the rental rates go up to the Rs.270 per sq.ft. per month as per the estimation of JLL India which is property consulting firm. According to the Ashutosh Limaye. who is research head at JLL India, “Now Multinational firms are looking for long term business in India and because of that they are increasingly choosing BKC to set up their head offices”.

According to real estate experts this is great time to sign up the real estate deals in Mumbai because property prices and rent will rise soon because of huge demand of commercial and residential space. In present, Abbott deal is one of the largest commercial real estate transactions in India. However; in 2012, Cipla Ltd which is another fastest growing pharmaceutical firm in India has brought 1.30 lakh sq.ft. at Peninsula Business Park in Lower Parel for about Rs.985 crore. From last one year the demand for commercial spaces in Mumbai is growing. As per the latest reports of property advisory CBRE, the uptake for commercial space has rose by 70 per cent in the second quarter of 2015 in comparison of previous quarter, which was led by BFSI (Banking, financial and insurance services) sector.