Mumbai’s residential home sales dropped to a three-year low in the quarter ended December as record home prices and higher interest rates crimped demand, according to Liases Foras Real Estate Rating & Research Pvt.
Sales in Mumbai, India’s most expensive property market, fell 17 percent from the previous quarter to 7.59 million square feet, said Pankaj Kapoor, founder of Liases Foras. The city’s unsold inventory, or the number of months needed to clear stock at the existing absorption rate, climbed to 44 months. A “healthy market” normally maintains about eight months of inventory, according to Kapoor.
“The likely scenario looks like we will see a dip in prices seeing the dismal sales and as liquidity remains tight,” Kapoor said.
The RBI raised borrowing costs by a record 375 basis points in 13 moves from mid-March 2010 to help curb inflation, hurting demand and investment. The apex bank also cut the nation’s growth forecast three days ago to 7 percent in the year through March from the 7.6 percent predicted in October, after the economy expanded at the slowest pace in nine quarters, based on the most recent government data.
The city’s unsold inventory climbed to a record 119.85 million square feet, according to Liases Foras, a Mumbai real estate research company whose clients include Housing Development Finance Corp., India’s largest mortgage lender. The weighted average selling price in Mumbai climbed to a record Rs.10,558 ($210) a square foot, the data showed.
The Mumbai housing market faced the risk of a price decline last year, said Om Ahuja, chief executive officer of residential services at the Indian unit of Jones Lang LaSalle Inc.
“Though developers are saddled with sizeable inventories of both ready and under-construction stock, they continue to be hesitant about announcing revised rates,” Ahuja said. Housing demand in the city has been showing signs of weakness for the last few quarters and this may continue, he said.
Bangalore and Chennai posted the largest sales increases last quarter. Sales in Bangalore climbed 54 percent from three months ended September to 14.16 million square feet, Kapoor said. Chennai sold 91 percent more homes at 7.44 million square feet, he said, boosted by new projects and as buyers rushed to purchase homes ahead of higher registration charges levied by the state government. Both cities posted their highest quarterly sales in at least three years, while prices remained little changed from the earlier quarter.
Sales in the National Capital Region, which includes New Delhi and its surrounding areas, gained 27 percent to 22.77 million square feet in the quarter, the data showed. The weighted average selling price rose to Rs.3,394.72 a square foot, 5 percent higher than the September quarter.
