Focus on delivery makes Mumbai realty realistic
Dec 05, 2013
Source : The Times of India


MUMBAI: A perception is gaining ground in Mumbai that the city’s property market has reached a saturation point, with critics citing the standing inventory of 48 months as evidence. However, a closer look at the market suggests that even though it is facing the effects of an overall slowdown, like any other part of the country, the high inventory level is not necessarily a sign of stress at the project level or with developers’ balance sheets.

As a matter of fact, the balance sheets of some leading developers indicate that they have weathered the worst slowdown since 2008-2010 and there is less debt and healthy growth. Even the stocks of some of these companies that had collapsed, have started picking up. It may be easy to criticise the fact that most of the real estate stocks are trading way below the listed price. Nevertheless, the realty index has performed better than the Sensex during the last 12-18 months, thereby; reflecting that the retail investors’ lack of confidence in the market is over. Although the number of bookings may well be short of the peak witnessed during the realty boom, for reasons ranging from macro-economic factors to high interest rates, the market cannot be termed as saturated.

Analysts tracking Mumbai’s real estate market maintain that developers have been realistic this year, by launching fewer projects than in the previous years. The cost of land has also become exorbitant. Harjith Bubber, CEO and managing director of CCI Projects, asserts that the need of the hour is to focus on delivering existing projects. A protracted process of obtaining approvals from authorities, shortage of labour and other unforeseen events, have led to delays in the completion of most projects in the city. The market is presently averse to risks, he explains. “Financial constraint is not a factor that is keeping a check on new launches. As the projects launched earlier are still underway, developers are focusing on completing and selling them, before announcing new projects. Although reports show that the present inventory of property in the city has set a new record, available and ready-to-possess properties have remained quite low. There is no inventory pile-up as such,” says Bubber.

Anshuman Magazine, CMD of CBRE South Asia, however, explains that developers have been facing liquidity constraints due to high borrowing costs and slow off-take of existing projects. Under such circumstances, it seems more realistic for the city’s developers to generate revenue by clearing existing inventory of projects, rather than launching new ones, he points out. Santosh Naik, MD and CEO of Disha Direct, feels that this is the right strategy, considering the prevalent market situation and general sentiments, which are not encouraging. “There are many reasons for developers to reschedule and postpone new launches. This may include the slowdown in the economy, low market sentiments, delay in approvals for new projects, financial constraints and non-availability of finance from banks due to the Reserve Bank of India’s (RBI’s) guidelines,” he elaborates.

Analysts point out that Mumbai’s realty market is driven by two sets of buyers. The first category comprises retail buyers who are actual users, while investors form the second category. Participation from investors may have slowed down in the city but the same cannot be said of end-users. However, both the set of buyers seem rather confused with the statistics that are being reported. Retail buyers feel that property rates are high and expect a correction in prices over the next few months. Investors, on the other hand, think that prices may not appreciate, given the present levels. Hence, both these segments are adopting a wait-and-watch approach.

Consequently, inventory has reached a record high. Developers, on their part, are more focused on execution and delivery than new launches. This is slowly but surely creating a certain balance in the city’s property market. Thus, ready inventory may actually turn out to be a blessing in disguise for the market, once the sentiments take a ‘U’ turn, according to analysts.

Latest Realty News

Godrej Properties buys out PE firm in Kolkata project
Dec 05, 2013
MUMBAI: Godrej Properties Ltd has bought out private equity (PE) firm Red Fort Capital’s 49 per cent stake in its subsidiary Godrej Developers Pvt Ltd (GDPL) for an undisclosed amount.
Why India needs REITs?
Dec 05, 2013
MUMBAI: A real estate investment trust (REIT) is a fresh investment mechanism being planned by the Securities and Exchange Board of India (SEBI). A REIT manages and owns income-generating developed property and is intended to offer common units to the public as an option for investment. These units represent ownership in the business of managing income-producing properties. REITs will make available away to real estate developers to commercialise developed property, providing an exit path. It wi
Conditions on RTI access to building plans lifted in Maharashtra
Dec 05, 2013
MUMBAI: State information commissioner on December 4 withdrew an order issued last month that imposed certain qualifications on obtaining building plans approved by the BMC under the Right to Information (RTI) Act.
Single-window clearance will cut housing cost, Pune realtors says
Dec 05, 2013
PUNE: Higher input, finance costs, non-availability of bank finance for real estate projects and exorbitant taxes are some of the problems that will be debated in the forthcoming Credai Conclave 2013, which will take place in New Delhi on December 13 and December 14.
Buying a house? It’s right time for realty check
Dec 05, 2013
MUMBAI: A recent report from property consultancy firm Knight Frank says that real estate prices in certain Mumbai areas have declined by 10%. The same report says almost 45% of the new properties that are coming up in the city are unsold.
Commercial realty projects find favour with PE firms: Cushman & Wakefield report
Dec 05, 2013
MUMBAI: The value of private equity transactions in the country's real estate sector surged 26% year-on-year in the nine months to September, indicating that PE investors remain bullish on the sector, particularly the commercial segment, despite weak sales and rising inventories.
Unitech defaults on Rs 200-crore loan from LIC
Dec 05, 2013
MUMBAI: Unitech, India's fourth largest real estate developer, defaulted on the payment of interest on a Rs 200-crore loan it had taken from Life Insurance Corporation of India (LIC) way back in 2007, joining the list of companies grappling with liquidity issues.
Road to evolution of Pune
Dec 04, 2013
PUNE: Pune has an advantage by virtue of the fact that it has been able to add to its borders by means of surrounding villages. This has served to decrease the pressure on the central city and encouraged an outward growth pattern. However, there are challenges related to Pune’s infrastructure, particularly its road network and these have more to do with the speed of this growth. While there are various proposals for road widening, these have to be translated into real time, to be effective, as i
Is it time to buy residential property in Mumbai?
Dec 04, 2013
MUMBAI: Here’s good news for those nurturing that elusive dream of owning an apartment in India’s financial capital. Like New York or London or any other blue chip market, Mumbai has thus far remained largely unscathed by a correction in real estate prices. And so, despite a pile up in inventory, a large pull back in demand, plummeting new launches and deteriorating finances of property developers, prices haven’t really come down. But now there are signs of a softening of prices according to a r
Hike in TDR prices takes the Mumbai market by surprize
Dec 04, 2013
MUMBAI: The real estate market in Mumbai has been going through ups and downs since the past five years. However, the segment received a major jolt due to the recent spike in transfer of development right (TDR), a move which has been received by the suburban developers with great caution and even disappointment. TDR plays an important role, at least in the suburbs of Mumbai. Ram Raheja, director and head-design and architecture, S Raheja, says, “TDR is an important component for builders redevel

Latest Realty News Of State

Realty Talk's