Mumbai real estate to see 6% price appreciation In 2015

By: Ramesh Nair, COO – Operations & International Director, JLL India

Many home buyers as well as investors have been speculating about the movement of residential property prices in Mumbai. These fence-sitters are watching the market’s movements keenly. Their guess is that prices could go down further in the next few months – which in turn has increased their hopes of landing a better deal for their money and delaying their purchase.

However, the market’s readings indicate that that it will start moving up later this year. An average price appreciation of around 6% is expected by the end of Q4 2015. Mumbai’s residential property market will start seeing a lot of buying activity in around six months, with buyers taking advantage of prevailing market conditions to get good deals. The increased market activity is expected to continue next year too.

Buyers’ market

Builders, who are already seeing the number of enquiries rise, expect the market to recover in the months ahead. Meanwhile, they are offering discounts, freebies, waivers, festive offers and attractive schemes to increase sales velocity. In some areas, builders are offering spot discounts of up to 10% on the base price of a property to buyers who are serious about making purchases. In other cases, buyers can negotiate the floor rise charges or get these waived off completely.

Buyers who are not in a hurry to move into a new house can book in the pre-launch stage of a project and get very competitive prices. To illustrate, booking in a pre-launch project in south Mumbai can easily translate into a discount of about 8-10%. In one of the eastern suburbs, a pre-launch project is offering a price of around Rs. 8,000/sq.ft., while a completed project nearby is charging Rs. 14,000/sq.ft.

Several schemes are also being offered, especially in pre-launch projects. These include the popular ones like 20:80, 30:70, 10:80:10 and 5:80:15. Such schemes remain popular with many buyers, although they have to pay higher base prices as compared to buyers who opt to pay a large chunk of the capital value at the outset.

For example, the price could be Rs. 12,000/sq.ft. in a project for buyers opting to make use of such schemes vis-à-vis Rs. 10,000/sq.ft. for buyers opting for construction-linked payment plans. In the same project, buyers paying the entire or a large part of the total capital value upfront could get a price of Rs. 8,500-9,000/sq.ft.

There are two primary reasons why these schemes continue to remain popular:

1. It becomes easier for developers to attract buyers and cover the interest that customers have to pay to the banks

2. Buyers only pay a small percentage of the total amount and get a relatively risk-free investment opportunity

Special deals for investors

Investors are bulk buyers interested in square feet areas and not units. Investors planning to buy 5,000-10,000 square feet or higher and then selling the same off before (or immediately after) possession can get special deals at prices ranging from Rs. 18,000-20,000/sq.ft. in South Mumbai areas like Lower Parel and Worli, instead of the prevailing market price of Rs. 30,000/sq.ft. Likewise, subject to their payment schedules, investors can get a price of Rs. 7,500-8,000/sq.ft. instead of the prevailing price of Rs. 14,000-Rs15,000/sq.ft. in a pre-launch project in Chembur. For investors, it is indeed a good time to enter the market and make a profit.

Locations that promise above-average appreciation

Investors interested in peripheral areas that will give better price appreciation than established locations can look at Ulwe, Kamothe,Karanjade and Dronagiri in Navi Mumbai. These areas will see moderate growth in the coming years, thanks to the upcoming international airport in Navi Mumbai and increased connectivity to Mumbai through the upcoming Mumbai Trans Harbour Link (MTHL).

The reason for the moderate rather than spectacular appreciation prospects is that these locations have already seen a good growth rate in the past, soon after the airport project was first announced.

Sewree is another area in Mumbai which could see moderate appreciation thanks to the MTHL. Other peripheral areas like Vasai-Virar,Boisar, Dahanu and Palghar could also see growth thanks to the upcoming bullet train project connecting Mumbai and Ahmedabad. Virar could benefit due to the upcoming Virar-Alibaug multi-modal corridor and the proposed elevated rail corridor connecting it to Churchgate. Another important project that could lift up property prices in Vasai and Virar is the proposed Delhi-Mumbai Industrial Corridor (DMIC).

Figures at a glance

Sub-Market	Capital Value Movement – 2013	Capital Value Movement – 2014	Units Sold (2013)	Units Sold (2014)
South Mumbai	1.4%	0.9%	1,997	837
South Central Mumbai	12.1%	9.5%	1,361	2,137
Western Suburbs I	10.1%	10.7%	3,124	3,771
Western Suburbs II	4.9%	5.6%	2,089	2,327
Navi Mumbai	6.1%	9.8%	11,980	7,674