India’s two sought-after living destinations – NCR and Mumbai – have been the worst hit by the current real estate meltdown. While property prices in Mumbai have fallen for the first time in recent history, NCR has seen the rates plummeting by 6 per cent since 2015 amid waning investor interest and builders sitting over incomplete projects.

Bengaluru and Hyderabad have seen some appreciation, while in Chennai, the price rise has been less than 5 per cent, according to data from the real-estate consultancy, Liases Foras. “NCR has been the worst affected because investor participation, as well as black money deployment, was very high. Prices were absolutely speculative as Delhi has enormous land availability. Moreover, uninhabitable locations were being sold at high prices. The bubble had to burst,” Pankaj Kapoor, founder and MD, Liases Foras, told BusinessLine .

Amit Oberoi, National Director at Colliers International, points out that investors made up for almost 50 per cent of the buyers in NCR until 2013. “Even before a project was completed, it was flipped twice or thrice between investors, leading to an increase in rates. These people are no longer participating in the market. So sales are shrinking,” he says.

 

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Sanjay Sharma, Managing Director of Gurgaon-based real-estate consultancy, Qubrex, says the Real Estate (Regulation and Development) Act (RERA) has not been effectively implemented in NCR. “Hence, that injection of confidence has not happened. In many places, the property is ready but physical and social infrastructure around it has not developed, depressing the prices,” he says.

Mumbai’s woes

However, Mumbai Metropolitan Region’s (MMR) story has been different. The financial capital saw a rapid rise in new launches from 2009 to 2014, with slum rehabilitation projects bringing in new supply. The proposed Navi Mumbai airport fuelled a real estate boom in the twin city and, along with new development beyond the suburbs, led to a supply glut.

“In MMR, the unsold inventory is the highest in the country (2,69,230 units or 48 months). An efficient market maintains 8 to 12 months of inventory, indicating a downward pressure on prices,” said Kapoor. Put simply, MMR requires four years to sell off the existing unsold units.

Samantak Das, chief economist and national director at Knight Frank India, says: “For the first time, we have seen a fall in quoted/asking price in Mumbai in 2017. The asking rate in Delhi fell in 2016 itself. The effective price discount through waivers in GST, stamp duty and registration is 10 to 12 per cent in Mumbai and 15 to 17 per cent in Delhi.”

He points out that while only 10 to 15 per cent of the projects were earlier giving this discount, now about 85 per cent of the projects are doling them out to improve sales. “Developers are trying to complete the projects for which they need to clock sales. There is price resistance in Mumbai, and this price has cracked for the first time. This will infuse a lot of demand,” he says.

Economic condition

Sharma says the overall economy is slowing down. “There is not much money with individuals or businesses to invest. As 2019 elections are approaching, the uncertainty in the market will increase and property prices will be in a limbo,” he says.

Kapoor believes that prices will not rise for the next two years. “I don’t see price rise across markets, as prices are still unaffordable and the pace has to grow further for the market to be sustainable,” he says.

According Knight Frank’s affordability index, the price of a house should not be more than 4.5 times the family income. In Mumbai, it is 7.5 times, and even in Gurugram, it is more than 5 times. These indicators point to a long overdue correction in the market and it seems to be happening finally.

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