Mumbai experiences change in property price in H1 2019.

By Abhay Shah, Realty Quarter

In the residential market, Mumbai has allegedly seen a decrease in capital rates, QoQ. The property market in the maximum city is being pressurized and prices are corrected, owing to multiple factors such as liquidity crunch, a decrease in land acquisition and delays in government policy.

Mumbai saw good momentum in real estate activity for the first quarter of 2019. Nevertheless, several factors resulted in a decrease in the city’s weighted average real estate rates. The global real estate consultant Knight Frank says that in the Mumbai residential capital market there has been a continuous 2% fall in prices from January to June 2019.

Ajit Panda, Founder and CEO of Spaciya Advisors, avers, “Developers in Mumbai are losing their holding ability and falling price owing to the ongoing liquidity crunch caused by the funding constraints to the non-banking finance companies (NBFC’s).”

In this context, Mumbai recorded 12% sales growth, YoY, but due to a notable rise in the new launch rates of 36%, this failed to boost development, placing enhanced stress on Mumbai’s already widespread inventory overhang. Currently, the quarters to sell unsold stock in the city stands between 8 and 12. Over the seven top metro towns in the second quarter of 2019, residential sales dropped by roughly 13%.

Reasons for the capital drop in significant sectors of Mumbai:

1) Lack of activities in MahaRERA:

Maharashtra has been known to lead all other States in the implementation of RERA. However, over the last few months, the MahaRERA has seen a substantial decrease in the speed of work, which has an effect on the overall operation of estate activities in major cities such as Mumbai, Pune and Nagpur. In the number of cases disposed of in the second quarter of 2019, the authority recorded a 21% decrease. One of the factors behind that lag was a delay in developing an online RERA portal to resolve complaints quickly. In the quarterly update of the developers enrolled with them, there was also an oversight on the authority.

2) Developments in outskirts:

In recent years, Mumbai’s satellite cities have been witnessing the real estate limelight with the development range of new flats within the city’s inner districts achieving a state of saturation. The supply and investment costs of housing flats in cities like Navi Mumbai, Thane and Dombivli are growing.

An international airport emerging in Navi Mumbai and a burgeoning IT park population dotting these remote areas ‘countryside are a boost to the real estate sector seeking opportunities for expansion. Competently priced apartment complexes and mega townships in Thane and Navi Mumbai have compelled builders in the inner city to decrease the city’s house purchasing prices to draw some exciting semblance from homebuyers.

3) Shift to a rental mindset:

With an influx of an increasingly young population of techies and other experts into the Central Business Districts such as Bandra Kurla Complex (BKC) and Nariman Point, interest in renting over purchasing a house has been swaying. A growing bachelor population chooses to rent flats as there is no assurance that they will live in one place and one city in spite of a trend in the job-hopping industry.  With a drop in purchase demand, in the capital ‘asks’ near some of these business districts there is no room for a price hike.