MUMBAI: In early 2013, a central Mumbai realtor’s son was set to join his father’s business. Then, the slowdown set in. The family patriarch asked the youngster to go abroad for higher studies. “For 8 years, real estate provided stability and growth. Now, it’s struggling.
I expect the market to remain slow for two years. It’s better my son uses this time to finish his studies,” the developer says. After last decade’s growth surge, developers have fewer takers. The Mumbai Metropolitan Region (includes Mumbai) has 48 months of unsold inventory, the June 2013 data by real estate research consultant Liases Foras shows.
“There’s been no price correction here. Developers hiked prices at an average of 4% in the past year,” Pankaj Kapoor, MD, Liases Foras, says. Between 2008 and 2013 mid-range property in Mumbai saw a 20%-50% capital appreciation. Capital values of high-end properties increased 40%-85%.
“Bulk of the residential demand is in the affordable, mid-range segments, which remains largely unmet. In these segments sales have remained stable, depending on location, features and prices. There has been no price slash or big discount,” Sanjay Dutt, executive MD, Cushman & Wakefield, says.
“Although there are some signs of corrections in some speculator-driven markets, buyers should not expect major price corrections as witnessed post-2008. Corrections will be marginal in the suburbs and emerging micro markets. Established micro markets will remain stable in the next 6-12 months,’’ Dutt adds.
Concurring with Dutt, chairman, Mayfair Housing Pvt Ltd, Nayan Shah, says developers now struggle for bank finance and pay higher costs for capital from other sources. Input costs have risen. “Developers are in no position to cut prices beyond 2% to 5%. The slowdown is more to do with doubts in the public mind on the safety of investments and performance of projects. Once a buyer is convinced, he books a flat. This decision period has increased from 15 days to 3 months,’’ he says.
Sluggish sales have forced firms to cut costs. Developers are launching smaller units to keep overall ticket sizes down. Shailesh Sanghvi, director, Sanghvi Group, says: “We believe buyers will soon shrug off their wait-and-watch policy. Companies may offer discounts of about Rs 200 per sq ft in coming festive season.”