Factors that impacted Mumbai’s real estate in 2013
Dec 28, 2013
Source : The Times of India

 

MUMBAI: Though Mumbai is the financial capital of India, the real estate market of the city has not been very encouraging in 2013 as the over-all performance graph was stagnant. The reasons for stagnancy could be justified due to various factors that impacted the market. A few of them have been discussed here:

  • Excess supply over Demand – This law of economics justifies the price reduction in the city and states. Last year, Mumbai saw majority of investors buying while there were a few end users who purchased properties. This year, the city had most of the investors selling their premises, thus resulting in excess supply. The market saw surplus supply from both investors and builders which resulted in the prices dipping in the city.
  • Another reason for reduced sales in the city was the pulling out of local investors and end-users from under-construction properties. This was because of the developer’s inability to deliver projects in time, making the buyers reluctant.
  • As an after effect, the builders landed in a financial deficit due to reduced sales. Those who had over-invested in lands and borrowed huge sums from banks, to raise capital for completing projects, could not stick to their repayment schedules. The burden of interest also hampered the completion of projects in time. Several bankers now fear that many builders might turn NPAs (Non Performing Assets). 
  • The new Development Control Regulation (DCR) changed the FSI calculations of smaller projects. Hence, builders who procured small projects started finding them non-feasible as they could not earn profits on those.
  • • While anticipating a correction in prices by about 20 per cent, end users held their investments in 2013 and went on a ‘wait and watch’ mode. Their expectations came true and the prices did drop by about 5-10 per cent in the city.
  • Since, property prices in Mumbai have already reached a peak there is a saturation that has set in. With buyers holding back investments, a correction in the market is expected to happen again in 2014.
  • The overall economic scenario in terms of business market up-scaling and growth got limited due to the Rupee devaluation. Real estate in Mumbai also suffered because of the same.
  • Too much of unwanted political interference in the existing business policies restricted the ideal growth to a great extent.
  • The pulling back of Foreign Institutional Investors (FII) from the Indian markets did impact Mumbai’s real estate in a negative tone. The impact of reduced investors was visible in the export business performance and stock markets too.

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