Real estate in Mumbai is probably going through its darkest phase. The word has been in around since the beginning of 2015 that the ‘year of recovery has arrived’. However, nothing much has changed; in fact, the property prices in Mumbai have been overall dented by 15 to 20%. This does not mean that the rates have physically gone down by that much, but it implies that taking into consideration all the factors like inflation, growth rate, incentive schemes etc. the property prices have not gone up and nor has the market sentiment turned positive. 2016 has been no better and the slow-down has continued in the residential real estate in Mumbai.
Residential real estate in Mumbai today is almost sitting on 1 lakh unsold inventory which would take anywhere between 2 to 3 years to liquidate. Out of this only 5% inventory is ready for possession balance is either under construction or is a part of stalled projects. These are alarming figures by any standards. Further, out of this 1 lakh inventory 75% is priced over one crore and therefore is not in the affordable segment. These two aspects are the most counterproductive for the Real estate in Mumbai.
The real estate builders in Mumbai are awaiting a miracle to happen, with their hands tied to the back. Though the cost of cement, steel and transportation has come down, the labour and land costs have gone up; thus leaving no scope for the builders to bring down the costs any further. The individual investor remains confused and is willing to play the ‘wait and watch game’ as nobody is able to predict the market turnaround. Mumbai real estate market was or is heavily dependent on foreign investments in terms of NRI investors. This market sentiment has been shattered with the present slow-down, it may take quite some time to recover and would in all probability follow recovery by the domestic market.
This has very serious implications for the real estate in Mumbai; it implies that the market would only go through a ‘timed correction’ i.e. to say that as years go by, the per-capita income increases, the individual investor would have more capital; will be able to pick up more loan amount and therefore would be able to invest in real estate at the prevailing rates, probably after 1 to 2 years. The real estate prices in Mumbai may not undergo any further correction; however, they may not enjoy any further growth as well, in the next couple of years.
Mumbai for one is the financial capital of India -the ‘King City’ and has the mojo to fight back and recover. The turnaround may take some time, but is bound to happen. Real estate developers in Mumbai just need to keep patience and faith.