Personal Finance

Mumbai sees early signs of price softening

| Updated on: Jul 02, 2011
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Mumbai developers appear to be holding onto the price line in spite of adverse market conditions.

Home loans have touched double digits; banks are demanding 20 per cent equity contribution of the loan value; and developers are finding it increasingly difficult to access finance, which, when available from the non-banking financial companies, carry up to 20 per cent interest.

Developers blame high land cost, which in Mumbai is as much as 70 per cent of the quoted sq. ft rate of built-up space, and escalating input cost for the high property prices.

A senior private sector bank officer said he was yet to zero in on an apartment to his liking that suits his budget of Rs one crore. He is eligible for about Rs 80 lakh plus loan, but found either the property price too high or the location too far from his workplace. The bank has a home search division that periodically sends alerts on the latest offers and special rates for its accountholders.


Some home finance companies and private banks too appear to be finding the quoted rates of developers unreasonable. A marketing executive with a private firm said lenders were unwilling to accept the quoted price of Rs 36 lakh for a 450-sq.ft single bedroom flat at Vasai, which is about 45 km from Mumbai.

He was told that the cost appeared inflated and he would get only 65 per cent of the cost as loan.

Mr Pankaj Kapoor, Managing Director, Liases Foras, a real estate research and consultancy firm, said a price correction was in the offing though it was extremely difficult to predict the timeline.

However, encouraging indications were there as some of the new launches made were considerably lower than the prevailing rates of the ready stock and near complete complexes at the same location, he said.

A leading builder was reported agreeable to Rs 14,500 a sq.ft in Kala Nagar, close to BKC, where quoted rates were as high as Rs 20,000. The catch was that he wanted substantial down payment. The rate goes up as upfront payment comes down, an inverse relationship.

Two similar dealings were reported at Wadala, another upmarket location.

Mr Kapoor said the high upfront payments helped developers improve their cash flow and hold on to the prices of other projects, where they would have sold some units. However, what was more important was the sign that developers were willing to negotiate which was not happening for quite sometime.

Mr Arun Kejriwal, Founder, Kris Research, said a correction of 30 per cent was round the corner. The current stalemate was more due to buyers looking for a correction and holding back on purchase and developers holding on to prices fearing that buyers would go for bottom-fishing if rates were lowered.

Based on interactions with developers, he said none were prepared for any launches in the festive season which is very important for them, stating that they neither had the desire nor the money to advertise. The bottom line is people are not willing to pay quoted prices anymore.

Mr Kejriwal said one of Mumbai's leading developer was scheduled to make Rs 12,000 crore repayment to his bank by June 30, which was unlikely given the sluggish sales. He said there were many like him holding on for a turnaround. From the ultra-high-end apartments to the mid-segment in Mumbai, there were surplus stocks.

Liases Foras has it that the readily available and pipeline inventory in Mumbai is over 1.82 lakh units of which a little over 3,000 apartments were sold in May.

Mr Anand Gupta, Managing Director, Choudhury & Choudhury, said the general atmosphere and the liquidity crunch definitely called for a correction.

Low supplies are delaying correction. Government approvals were extremely hard to come by and those approved were awaiting further clearances.

A few months ago, the President of the Maharashtra Chamber of Housing, Mr Sunil Mantri, asked member-developers to refrain from starting any project without all approvals and clearances in place.

Published on March 12, 2018

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