Mumbai records an upswing in sales volume between May and October 2016, thanks to stable capital values. Lower loan interest rates facilitated by repeated rate cuts and the introduction of RERA has also worked in favour of the financial capital’s real estate scenario.
Come October, the real estate market of Mumbai was inundated with festive offers, starting from free foreign tours to appliance vouchers and club memberships. With the deluge of freebies circulating the market, a rise in sales volume would seem like a foregone conclusion. However, what propelled sales in Mumbai, gearing it on a growth trajectory, was a combination of factors which excluded festive offers.
Property transactions improved by 4-5 percent between May and October 2016, confirmed Gaurav Dhamija, Managing Director, DIMA Infra-tech Pvt Ltd. This surge in sales, almost after a two-year long drought, has lent cheer and positivity to the landscape, while boosting hopes for a vibrant 2017. Let’s take a quick look at the factors that transformed the real estate story of India’s financial capital.
Stable property prices
As delineated in 99acres Insite Report, stagnant home values in the last two years, at the same time, an increase in remunerations of salaried professionals, have improved the affordability quotient. This factor played a key role in driving property sales by a decent margin. However, transactions increased only in small and mid-ticket sizes, within the price band of Rs 75 lakh and Rs 1 crore, clarified Dhamija. High-end properties, costing more than Rs 1 crore, did not witness any change in demand.
Lower home loans rates
The fence-sitters of the previous quarters were motivated to make a purchase by the incessant rate cuts facilitated by the Reserve Bank of India. Homebuyers rejoiced at the significant reduction in interest rate of home loans by four major lenders, namely SBI, ICICI, HDFC and IHFL. All the four institutions have slashed interest rates by up to 0.15 percent for loans up to Rs 75 lakh, bringing the rates down to as much as 9.15 percent. For home loans beyond Rs 75 lakh, ICICI, HDFC and IHFL have reduced rates by 0.05 percent.
In fact, interest rates have been reduced to the lowest in six years. End-users who had adopted a wait-and-watch approach in the past, anticipating prices to decline, are bound to take the plunge now. The fact that banks undertook this strategic step in the midst of a busy festive season has also worked in favour of the property market. This vital move is expected to be replicated by other lenders, thus, lowering borrowers' home loan instalment burden.
Declaration of RERA
Homebuying sentiment has been on an upswing since the approval of a Real Estate Regulatory Authority (RERA). The promise of increased transparency, accountability, efficiency in construction and timely implementation of projects by the Real Estate (Regulation and Development) Act 2016 has served to make homebuyers feel more secure about making property investments.
Clauses such as the introduction of an escrow account, absence of additional charges post sale of an apartment and transparency regarding layout plan and completion schedule is likely to end builder autocracy. Furthermore, developers would be made accountable for project delays and will have to pay the same interest rate as the EMI paid by the homebuyer to the bank.
Although such governmental initiatives have kept market sentiments afloat in Mumbai, end-users have been opting for projects by only reputed developers. Real estate projects by new players continue to face a paucity of buyers. Besides preference for big brands, almost 90 percent of homebuyers have demonstrated their inclination towards ready or nearly-complete projects due to the uncertainty associated with possession.
However, developers and brokers are positive that the current buoyancy in Mumbai’s real estate landscape would spill over to 2017. With the increase in transparency and quality of projects, both the quantity and quality of deals are anticipated to improve, thus turning around the realty fortunes of the megapolis.