Mumbai, NCR most affected by real estate slowdown

Rashmi Pratap Mumbai | Updated on March 22, 2018 Published on March 22, 2018

In many places, the property is ready but social infrastructure around it has not developed, depressing the prices.   -  PAUL NORONHA

Developers offering attractive discounts to woo buyers

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.




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.

Published on March 22, 2018

A letter from the Editor

Dear Readers,

The coronavirus crisis has changed the world completely in the last few months. All of us have been locked into our homes, economic activity has come to a near standstill. Everyone has been impacted.

Including your favourite business and financial newspaper. Our printing and distribution chains have been severely disrupted across the country, leaving readers without access to newspapers. Newspaper delivery agents have also been unable to service their customers because of multiple restrictions.

In these difficult times, we, at BusinessLine have been working continuously every day so that you are informed about all the developments – whether on the pandemic, on policy responses, or the impact on the world of business and finance. Our team has been working round the clock to keep track of developments so that you – the reader – gets accurate information and actionable insights so that you can protect your jobs, businesses, finances and investments.

We are trying our best to ensure the newspaper reaches your hands every day. We have also ensured that even if your paper is not delivered, you can access BusinessLine in the e-paper format – just as it appears in print. Our website and apps too, are updated every minute, so that you can access the information you want anywhere, anytime.

But all this comes at a heavy cost. As you are aware, the lockdowns have wiped out almost all our entire revenue stream. Sustaining our quality journalism has become extremely challenging. That we have managed so far is thanks to your support. I thank all our subscribers – print and digital – for your support.

I appeal to all or readers to help us navigate these challenging times and help sustain one of the truly independent and credible voices in the world of Indian journalism. Doing so is easy. You can help us enormously simply by subscribing to our digital or e-paper editions. We offer several affordable subscription plans for our website, which includes Portfolio, our investment advisory section that offers rich investment advice from our highly qualified, in-house Research Bureau, the only such team in the Indian newspaper industry.

A little help from you can make a huge difference to the cause of quality journalism!

Support Quality Journalism
This article is closed for comments.
Please Email the Editor
You have read 1 out of 3 free articles for this week. For full access, please subscribe and get unlimited access to all sections.