While the unsold residential stock in Mumbai has jumped dramatically, developers have stayed away from cutting prices in the low and medium housing segments. The slowdown has largely hit the luxury segment.
A micro-market breakup of real estate consulting firm Knight Frank’s estimated 80,000 unsold houses under construction in the Mumbai Metropolitan Region reveals South and Central Mumbai are the worst hit. “Most projects in South Mumbai cost at least Rs 3.5 crore. People buying flats here don’t normally take home loans. Since their ability to raise money has been hit, so has the sales of super-luxury houses,” said Pranay Vakil, chairman of Knight Frank (India).
Vakil said in a slowdown-hit market, there are takers for units in the Rs 25 lakh to Rs 50 lakh price range. For instance, Navi Mumbai and Thane have less percentage of unsold stock. The unsold inventory of
80,000 units forms 37 per cent of the total residential supply under construction in MMR. A survey by real estate research agency Liases Foras puts the number of unsold houses at 1.13 lakh.
Pankaj Kapoor, CEO of Liases Foras, pointed out that developers can afford to hold on to their unrealistic rates as not much of their own equity is involved in the project. “Developers make most of their money during pre-launches when 20-30 per cent of the project is sold to private and institutional investors. At this rate, what we will have is an inefficient market that remains in hibernation for three years with no change in prices. While developers have nothing to lose, they will eventually frustrate the investors and it is the capital that will lose,” he said.
To compound the mess, the Brihanmumbai Municipal Corporation’s new Development Control Rules (DCRs) have upset the excess profit calculation of developers. Vakil said 3,000 projects have been asked to re-submit their plans. “Developers have pre-sold their projects. Now, they won’t be able to deliver on the promised large balconies,” said Kapoor.