Weak customer sentiments, slow absorption and accumulation of unsold stock has led to reduced number of new launches in Mumbai. High property prices are keeping buyers away from the market.
After Delhi NCR, Mumbai recorded the sharpest decline in number of new residential launches in the first half of 2015. This was stated in the half yearly report by Knight Frank, according to which, the Financial Capital witnessed a 47 per cent drop in new project launches in the first half of 2015, as compared to the second half of 2014. While Mumbai has been one of the top markets for new launches since the last 5 years, this year saw a decline due to increased levels of unsold stock.
Reiterating, Sandeep Ahuja, CEO, Richa Realtors says, “Accumulation of inventory has refrained developers from coming up with new launches in the city. Currently, sellers have a tedious task of flushing out this inventory in order to move on to new projects.”
One of the major reasons for the piled up inventory is slowed absorption of housing units. As per Knight Frank’s report, there were about 67,700 housing units sold in 2014, whereas, in 2015, the forecasted number is around 62,600 units. Negative buyer sentiments and high property prices have forced majority of the genuine buyers to sit on the fence and wait for the economy to revive. Ahuja avers, “Approximately 70 per cent of the unsold units in Mumbai are priced above Rs 1 crore. These are way above the affordability of an average earning individual.”
Giving further insights on the sale trends in Mumbai’s realty market space, Ahuja says, “Sale of uber luxury apartments has remained largely stable as most of the buyers opting for these apartments are non-resident Indians (NRIs) and high-net worth individuals (HNIs). On the contrary, sale of luxury and affordable luxury properties have definitely shrunk due to high prices, which are expected to remain stagnant for the next 12 months.”
Areas most hit by the falling sale volumes and thus, dropping new launches were Central and South Mumbai. Here, most of the properties were in the luxury and uber-luxury category and were priced above Rs 3 crore. The eastern and western suburbs saw some project launches in the luxury and affordable luxury segment. Most of the projects were priced between Rs 90 lakh and Rs 1.5-2 crore.
Explaining, Yashwant Dalal, President, Estate Agents Association of India says, “In addition to the cost of the property, there are huge expenditures on Brihanmumbai Municipal Corporation (BMC) taxes and maintenance charges. Developers do not consider cutting down on amenities to reduce the property cost; and buyers are forced to buy what is available in the market. Until property prices, or the total expense from a buyer’s pocket is brought down to realistic levels, Mumbai will continue to be plagued by low sale volumes.”
Conditions in other suburban markets such as Navi Mumbai and Thane are relatively good and stable as compared to Mumbai Metropolitan Region (MMR). These areas are seeing new and affordable project launches with necessary amenities. Most of these projects are integrated townships. Also, the neighboring social and physical infrastructure is attracting developers as well as buyers to cash in on the opportunities available in these areas.
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