CRISIL expects Mumbai realty prices to dip 8-10%

CRISIL Research expects real estate prices in Mumbai to decline by 8-10 per cent in 2011.

In Mumbai, falling demand, owing to diminished affordability, and rising interest rates will trigger a decline. Prices of houses soared by 43 per cent in 2010, in the city's three major supply pockets. Prices surpassed their peak values, attained in the first half of 2008, by 26 per cent, adversely affecting housing affordability.

Extent of decline

CRISIL said the extent of price decline would vary. Prices in premium locations such as South Mumbai and Central Mumbai, which have an excess supply of houses priced at more than Rs 5 crore, might decline by 15-20 per cent over the next 12 months.

Prices will decline more moderately, by about six per cent, in areas such as Vasai and Virar, where affordability is relatively better.

The study covered the price trend in major supply pockets in the western suburbs such as Goregaon, Malad, Kandivali and Borivali; besides Thane (Ghodbunder Road) and the central suburbs of Dombivli and Kalyan.

These pockets represent the trend of the whole city. Mumbai and NCR will together account for more than half the 1.5 billion sq ft housing supply planned in India's 10 leading cities up to 2013, the report said.

“Reduced affordability and a likely increase in interest rates by the RBI will subdue demand and depress housing prices in Mumbai in 2011. In NCR, relatively better affordability will prop prices despite any increase in the interest rates,” said Mr Nagarajan Narasimhan, Director, CRISIL Research.

NCR scene

CRISIL expects prices in the NCR (National Capital Region) to rise marginally. The study covered Noida and the outskirts of Ghaziabad and Faridabad.

Prices will move up marginally because of relatively better affordability. Prices went up only by six per cent in 2010 in the capital region's three major supply pockets.

Current prices

Prices in these areas are currently 15-20 per cent less than their peak values in the second half of 2007, making affordability relatively better than in Mumbai.

CRISIL Research expects average prices in the region to move up marginally by 3-4 per cent in 2011.