Inventory of Rs 45,000 crore in Central Mumbai stayed unsold – ICRA Report.

By Abhay Shah, Realty Quarter

According to ICRA, a rating agency, inventory worth Rs 45,000 crore stayed unsold in Central Mumbai as on June 2019. Considering the large value of inventory on the micro-market, its underperformance has seriously affected Mumbai’s real estate industry, it said.

“Central Mumbai has been witnessing significant high-value inventory build-up due to weakened demand over the past two to three years,” said Anand Kulkarni, Assistant Vice President and Associate Head (Corporate Ratings), ICRA.

According to the ICRA, the micro-market in Central Mumbai has a 33% share of the total apartments, 70% of which is made up of developers from tier I. Central Mumbai adds to 32% of Mumbai City’s total unsold inventory, but in comparison of inventory cost, the share is much greater at around 55% and more than 70% is from Tier-I developers.

The rating agency expects the weakness of Mumbai’s luxury real estate market to proceed with liquidity stress and poor customer demand in FY20 which will be faced by the developers.

The second quarter of the last fiscal saw the NBFC crisis aggravate the sector’s liquidity. The luxury real estate segment was plagued by high land and construction costs, low demand, back-ended customer advances and limited external financing.

Nevertheless, it feels that the maintaining of supply discipline remains essential to strengthen developers’ negotiation power, says the agency.