Mumbai real estate is debating over a possible price correction as sale registrations for September recorded a 29-month low at 4,137, down 22 per cent year-on-year. A section of property analysts believe price correction is inevitable as new launches early next year will happen at more competitive prices, despite the current fall in sales.
However, the gloomy sales scenario hasn’t led to a price correction so far, as developers continue to hold on to their price-line.
The Maharashtra Chamber of Housing Industry’s (MCHI) property expo this month too didn’t elicit any significant response from home-seekers.
A Prabhudas Lilladher report said that there has been a price increase between 5-20 per cent across projects, since the last MCHI exhibition.
Nomura Equity Research said, despite the sluggish sales, prices had risen approximately 17 per cent during the past one year, and eight per cent in the last six months.
Nomura researchers said indications were that leading developers were undeterred by the slowing sales momentum, and that some projects on the city outskirts had gone up by approximately 30 per cent (from Rs.3,000 a square foot in October last year to Rs.4,000 a square foot), while those in nearer suburbs hadn’t been hiked to that extent. The increases have been in distant places, such as Kalyan, Dombivali and Thane, besides Mulund in central Mumbai.
They felt that the high prices would continue for a few more months despite poor sales, before a correction sets in. Some of the developers concurred with the view, but stated that a correction could happen in the next two-three quarters, they added.
A trigger to propel sales could come in the wake of new launches, likely in February and March next year, which are expected to be priced lower, and, consequently bring approximately a 15-20 per cent correction in existing and ongoing project stocks.
Many developers said they had factored in sluggish sales to continue for another 6-8 months. The fatigue factor of sitting over inventories might prompt a price reduction, which would be project-specific. Home buyers, who had stayed away so far, would be attracted, as they had been sitting out for long.
Anand Gupta of the Builders Association of India, said property prices in Navi Mumbai did see a spurt in the third and fourth quarters of the last fiscal, as land prices had increased following the announcement of a new airport coming up there. However, there have been no increases in other areas and, on the contrary, developers were now willing to negotiate and reduce prices by 5-10 per cent.
While property registrations have seen a 20 per cent-plus drop, he said it would be 50 per cent for new property sales, as the data included old and new registrations. With limited stocks and very few projects launched in the last one year, home-seekers were going in for resale properties, he said.
Anuj Puri, Chairman & Country Head, Jones Lang LaSalle, India, said following the latest RBI policy rate hike, it was undoubtedly a buyer’s market now, and investor activity in residential real estate would decrease further. New launches would decline, as would growth in capital values. He felt that the current scenario would hasten a correction in metros, where residential markets had slowed down due to overly high product cost.
Puri, said while demand slows down in the city centres, it trickles down into the suburbs and satellite towns. Home buyers are being pragmatic in their expectations regarding location, connectivity, and even basic social and civic infrastructure.
It seems the developers are willing to relent off the radar, but averse to reducing the quoted price below a certain point. This is partially because they don’t want to advertise the fact that certain customers paid less than some others. They are likely to offer incentives instead.
