Innovative discounts won't revive Mumbai real estate:JM Financial
The report highlights discounts available on execution of deal (10-15 percent) remains a preferred way of giving discounts than a cut in declared property rate.
Nov 04, 2015
Source : MoneyControl


Mumbai: Innovative discounts will not be of much help in boosting house sales in Mumbai because prices are way beyond the reach of most buyers, feels brokerage house JM Financial. The report comes on the back of the MCHI's bi-annual exhibition that saw a participation from 150+ developers covering more than 300 projects. In a report, the firm says the subvention schemes, stamp duty/floor rise/maintenance bill waiver and freebies (Iphone, holiday trips) that developers are resorting to form only 1-5 percent of the property value, which is not material in altering purchase behaviour. The report highlights discounts available on execution of deal (10-15 percent) remains a preferred way of giving discounts than a cut in declared property rate. The brokerage suggests staying invested into realty companies with strong brand name and a robust balance sheet and has a buy call on Oberoi Realty (target price: Rs 320) and Godrej Properties (target price: Rs 365)

Highlights from the report:

Pricing maintained

The Mumbai Metropolitan Region witnessed a marginal (1 percent) decline in pricing over last year, based on our visit to developers in the exhibition. Few regions witnessed material price correction (Kalyan, Virar, Dahisar) while pricing remained stable in other regions.

High inventory

Mumbai's inventory or unsold houses remain high at 50 months. -

Transparency, execution key

Execution visibility and right pricing are key concerns for end-uses. Visibility on approval schedule, as attempted by the Maharashtra government, improves project execution (reduces delay linked cost escalation) and increases customers confidence in developers.

In the interim, high liquidity improves developers holding capacity:

Availability of funds improves the holding capacity of developers as sector awaits demand recovery. A price correction will be a measure of last resort as the sector could see consolidation where distressed developers with good assets will make an attractive acquisition for developers with healthy balance sheet.

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