Track2Realty Exclusive: Mumbai real estate has historically been the red hot property, something worth aspiration of millions. The island city with less supply and more demand with ever increasing migration only meant that even if the market deviated from the conventional wisdom of economics in demand & supply dynamics, it still would be a sellers’ market. The price index, demand-supply gap, the inventory and all other indicators collectively were giving lending credence to this school of thought. And Mumbai real estate continued to command the best premium not just among the other metro cities of India but also a sought after location in global ratings.
What then has gone wrong to the extent that the indicators are suddenly showing a different picture and hence making Mumbai property a buyers’ market? Analysts believe it is the over reliance of raw statistics that is misleading the outlook over Mumbai property market. Fundamentally there is nothing wrong with Mumbai real estate and it is just the fact that the change of business strategy borne out of the global economic slowdown is changing the way the realty market has been operating in the city. That may look gloomy for an outside view, but is actually making the Mumbai real estate a more matured market.
To a large extent Mumbai market seems to be tilted in favour of the buyers, but in reality it is an equal opportunity market for both the buyers and the sellers. Plain statistics may indicate that crisis is looming large in Mumbai real estate which is sitting over an inventory of 48 months, but the statistics never suggest why this inventory has piled up. To say that affordability is an issue may be true, but that has been the reality of Mumbai market for ages. After all, Mumbai has the highest per capita income as well.
The answer lies in the fact that while the developers have got into a joint development model with the land owners the focus is more on the execution than spending the resources on the principal component of land and then waiting for the projects to start. Moreover, there are lesser new launches in recent times and this also indicates that the focus is more on the execution than launching of the new projects.
Of course, the slowdown in the economy in general is making the sentiments bearish but that is what is giving a much realistic market to the buyers as of now. Mumbai property seekers realise the moment the macro-economic outlook are bullish, the prices that have hovered around the same rate for almost a year now would hit the sky once again. And that answers the home buyers’ query of whether it is the right time to buy Mumbai property.
Diipesh Bhagtani, Director, Jaycee Homes agrees that a lot has changed in the Mumbai property market and there have been a lot of changes in the government policies as well. New DCR rules have come up, regulatory body is being established, FSI in South Mumbai for redevelopment of dilapidated buildings has gone up, buying power have gone down and so on. Inflation too has played a major role in the purchase of high value commodity. Real estate being one of them has also been slow moving overall this year.
“All the festivals have been better than the rest of the year and the same is expected for the forthcoming festivals. The prices have also stabilized this year. There are lot of value add-ons being offered by the developers as per their marketing strategies. All this is expected to change by 2014 with more clarity coming from the government. I feel this is the right time to invest in a property as this will change upwards by next year,” says Bhagtani.
A Cushman & Wakefield report on demand outstripping supply says Mumbai is expected to see the least imbalance in demand and supply with demand outstripping by only 5%. The report says Mumbai is expected to witness additional demand of approximately 225,000 units for mid and high-end segment in the next 5 years while the supply in these categories will be nearly 214,000 units. Of the total demand in these two segments, majority will be seen in the mid-ranged housing which will remain underserviced. Overall though Mumbai is expected to see large supply in 2014 and 2015, most of the upcoming supply will be in the HIG category. The price points at which MIG projects have been launched are also higher than what end users of MIG would like to pay for.
Agreeing that Mumbai property is increasingly turning in favour of the buyers, Manju Yagnik, Vice Chairperson of Nahar Group says overall economic slowdown, higher interest rates on home loans etc are the few reasons that are restraining the home buyers from taking final decision these days. However, it should be considered as a temporary phenomenon. We are sure that the Reserve Bank of India and the government would take positive measures to bring optimism in the market in the days ahead.
“There is a lot of inventory with the developers over the last two years which they will open up in this festive season. Buyers should avail this opportunity to strike a good deal with the developer. Once the buyer has identified the property based on the amenities and infrastructure, he should do a market study of the location/area and then negotiate with the developer to get a good price. There cannot be a fixed rate for negotiation as it will depend on the demand and supply in the area. The buyers today are aware about the markets as well as his needs therefore he should not just fall for flattering offers and discounts but analyze before he takes a decision,” says Yagnik.
Some call it buyers’ market while others prefer to call it an equal opportunity market but the fact remains that the macro-economic indicators coupled with the softening of the Mumbai property makes it an ideal time for the buyers to invest. Analysts are unanimous that with the projected demand outstripping the supply, it may soon turn out to be red hot and the wishful thoughts of a substantial price correction in the city will then remain just that—a wish. Also, the festive spirit has led to many developers going extra mile with offers, freebies and incentives. Collectively, this makes the Mumbai property probably the best time to invest.
