MUMBAI: In the last two years, the Prime Residential Development Land Index for Mumbai has witnessed an appreciation of 35.2%.
The most significant contributors for this performance were change in development norms and increase in prime property price, said a Knight Frank research report released on Thursday. It tracks residential and office land prices across key Asian cities.
In Mumbai, the report said change in development norms allowed additional compensatory development potential for land. During last year (Q4 2012 to Q4 2013) the index was up by a marginal 2.8% on account of a residential market slump, which stunted price growth.
''Notwithstanding the muted growth in end product price, land suitable for prime residential development witnessed unabated interest. Real estate developers with a reputation for luxury residential projects offering apartments priced over USD 2 million (Rs 12 crore approx) are the foremost contenders. The land also evinces interest from high net worth individuals looking to develop their abode by paying a princely sum,'' it said.
However, the Prime Office Development Land Index showed a decline of 13.1% in the last two years because of a weak economy that impacted office space absorption combined with large quantum of office supply. ''Such a scenario exerted pressure on office rents even as the cost of construction continued to inch up during this period,'' said the report. The slide continued during last year (Q4 2012 to Q4 2013), taking the index down 7.3%.
The prime residential development market would continue to remain sluggish for a major part of 2014 on account of ''stretched affordability'' and an uncertain political and economic scenario. ''However, paucity of prime residential land would ensure continued buyer interest for such land parcels. From the perspective of a prime office development market, an overbearing supply pipeline in 2014 coupled with a marginal improvement in demand will keep rentals in check. As a result, demand for prime office land will remain sluggish,'' it said.