Track2Realty: Mumbai’s residential segment witnessed mixed sentiments during the first six months of the year. While the city’s leasing market displayed signs of weakness during the review period, the sales market managed to hold its ground with limited capital appreciation in a few locations. These are the findings of CBRE’s latest research report on the residential sector, ‘India Residential Market View H1 2013’.
Although supply addition witnessed an upsurge compared to the second half of 2012, end-user demand remained low on the back of a weak economic sentiment, prevailing property prices and high home loan rates. On the other hand, developers were also faced with challenges, such as high funding costs, increasing input costs and persistent delays in project approvals.
Supply addition in the premium/luxury segment remained largely concentrated in Central Mumbai, despite demand for luxury residential apartments remaining low in Central and South Mumbai. The Western and Eastern Suburbs witnessed a number of new launches during the first half of 2013. On the other hand, the Extended Suburbs of Western and Eastern Mumbai witnessed an increase in demand owing to availability of numerous affordable residential options by reputed developers.
Commenting on the findings of the report, Anshuman Magazine, Chairman and Managing Director of CBRE, South Asia said, “Mumbai is likely to witness subdued demand in the residential segment in the second half of 2013. The RBI’s recent decision to disallow banks from providing loans for under-construction projects through innovative schemes will adversely affect the city’s residential transaction activity. New project launches are anticipated to remain low as developers will focus on clearing inventory and executing existing projects.”
Owing to high price points and limited transaction activity in the premium segment, capital values remained stable in the prime locations of South and Central Mumbai. Values in the Western Suburbs, Extended Eastern Suburbs, Navi Mumbai and Thane, however, witnessed an increment of about 8-11% as compared to the second half of 2012. Values in the Eastern and Extended Western suburbs also appreciated marginally by 2-4% over the previous review period.
Owing to the prevailing economic scenario, capital values witnessed a relatively modest appreciation in the high-end/mid-end segment across most micro-markets during this period. Central Mumbai, Western Suburbs and Eastern Suburbs witnessed an increase in values by approximately 3-5%; while values in the Extended Eastern and Extended Western Suburban locations appreciated by around 6-9%.
Mumbai’s leasing market witnessed weakness in demand and consequently in rental movement during the review period. Rental values either dipped or remained stable across most micro markets in the luxury/premium segment in the city. Rentals declined by about 4-6% in the premium locations of South and Central regions and in the Eastern Suburbs of Mumbai, largely due to a shift in the pool of expatriates to the Western Suburbs of Bandra. Additionally, rental values in the high-end/mid-end category of the Southern, Central, Eastern and Western suburbs also declined. Owing to supply pressures, landlords reduced their rental expectations to lease out vacant units.
