Track2Realty Exclusive: Statistics often only tell half the story and in real estate this old adage is all the more true as the figure are often not the facts and ground realities may juxtapose facts with figure. For instance, a perception is gaining ground that Mumbai property has reached beyond its saturation point and the standing inventory of 48 months is being cited as the evidence.
However, a close look at the Mumbai realty suggests that even though the market, like any other part of the country is facing the effects of overall slowdown the high inventory level is not necessarily the sign of stress at the project level or with the developers’ balance sheets.
As a matter of fact, the balance sheet of some of the leading developers is showing the company has weathered the worst cycle of slowdown post 2008-10 and there is less debt and healthy growth. Even the stocks of some of these companies that had collapsed have now again started picking up.
It is easy to criticise that most of the real estate stocks are trading way below the listed price, but then the Realty Index in the last 12-18 months have actually done better than the Sensex and it reflects the crisis of confidence by the retail investors is over. They may not be booking as many properties as during the peak of realty boom, and the reasons range from macro-economy to high interest rates, but the market can not be termed as saturated by any stretch of imagination.
Analysts tracking the Mumbai property market maintain Mumbai developers have been realistic this year to have less launches and focus on delivery of existing projects. This is actually making the city market more realistic and it is not the financial constraints that have forced developers to resist new launches.
With land cost hitting the roof most of the developers are looking forward to complete the project and sell it first than launch the new project. Moreover, clearances are always an issue with the Mumbai real estate. Collectively, this may be lending credence to the prophets of doomsday but does not reflect the ground reality of property market of Mumbai.
Harjith Bubber, CEO and Managing Director, CCI Projects asserts it is definitely the need of the hour to focus on delivering the existing projects as various factors have led to delay in completion of most projects in the city. Slow permissions from authorities, shortage of labour and other unforeseen events have been the cause of the same. The market is currently risk averse and therefore it is a wise decision for developers to concentrate on delivery of projects.
“Financial constraint is not the factor that is keeping a check on new launches. Since the projects launched earlier are still underway, the developers are focusing on completing those and selling them before announcing new projects. Although reports show that there is record inventory of property in the city currently, the fact remains that the available and ready-to-possess property is still quite low. There is no inventory pile-up as such,” says Bubber.
Anshuman Magazine, CMD of CBRE, South Asia, however, says developers have been facing liquidity constraints due to high borrowing costs and slow off take of existing projects. Under such circumstances, it seems more realistic for the city’s developers to generate revenues by clearing existing inventory of projects, rather than launching new ones.
Santosh Naik, MD & CEO of Disha Direct agrees that the Mumbai developers have been realistic this year to have less launches and focus on delivery of existing projects. According to him, there are very few new launches this year as all developers are focusing on selling and completing ongoing projects. This is the right strategy in current market situation and general sentiments which are not good at all. This will help developers to generate funds to complete existing projects, deliver them at the earliest and then launch new projects.
“There are many reasons for developers to reschedule and postpone new launches. Some of them are slow down in economy, low market sentiments, delay in approvals of new projects, non availability of finance from banks due to RBI guidelines and off course major financial constraints,” says Naik.
Analysts suggest an outside view on the developments in the Mumbai property market may not give the right picture as Mumbai market is driven by two sets of buyers. In the first category are retail buyers who are actual users and then there are investors. Investor activity may have slowed down in the city but not the end-users. However, both set of buyers are confused with the reported statistics that is more misleading than guiding the buyers.
There is a good demand in Mumbai market but retail buyers feel the rates are high and correction will happen in next few months. The investors think they won’t get any appreciation at current price. So, overall situation is wait and watch for both these segments and due to this inventory has reached to a record level.
Developers on their part are more focussed on execution and delivery than new launches and this is slowly but surely creating a level playing field in Mumbai property market. Ready inventory, as a matter of fact, is going to be blessing in disguise for Mumbai market once the sentiments take ‘U’ turn, maintain analysts.
