MUMBAI: The residential property market in Mumbai is turning in favour of buyers with inventory levels rising and prices weakening. Residential property prices in some south and central Mumbai locations such as Parel, Lower Parel and Mahalaxmi have declined nearly 10% over the previous three quarters with the increase in the number of unsold homes and prospective buyers reluctant to exceed budgets amid a slump, said property consultancy Knight Frank India.
Developers have been open to negotiation, especially in the premium segment, reducing prices up to 25% for a sizeable upfront payment. Prices in Navi Mumbai, Thane and the peripheral suburbs of central and western Mumbai have either been stable or have trended marginally upward, said the consultant.
"On the residential front, the rise in interest cost and decline in net profits during 2013 will compel developers to lighten inventory load and deleverage their balance sheets," said Shishir Baijal, CMD, Knight Frank India. "Demand, however, is likely to remain subdued over the initial part of 2014 as the market continues to bottom out against the backdrop of a sluggish economy," Baijal said. Approximately 47,488 units were launched in the January-September period, a sharp 28% drop from a year ago. The difference is even greater at 42% and 46%, when compared with the same period in 2011 and 2010, respectively.
"It is quite evident that developers are keeping new launches in check in order to bridge the supply and demand gap," said the report. Rising inventory levels have been a pressure point for realty developers across the country, especially in Mumbai, India's most expensive property market. Nearly 290,000 residential units are under construction in the Mumbai residential market while unsold inventory levels are close to 130,000. "The fact that the unsold inventory level in the Mumbai Metropolitan Region is almost 45% while that in the National Capital Region (NCR) is 26% gives a perspective of the dire situation of the Mumbai residential market, considering that the NCR has nearly twice the number of units under construction compared to Mumbai," the report said.
Unsold inventory constitutes units in ready as well as under-construction projects. For some time now, property brokers have highlighted delays in project deliveries with the economic slowdown eroding demand. The gap between prices of under-construction and ready apartments has widened to its highest and is as much as 100% in some instances due to delays and uncertainty in approvals, apart from other reasons.
Knight Frank India is of the view that the Mumbai office property market is bottoming out