Knight Frank reports that the Indian metropolitan center of Mumbai has moved only a little over half of its usual volume in residential real estate in 2012 so far as compared to the same time frame last year. Fewer apartments and dwellings have been put on the market as sellers await more activity, and increases in building costs are not helping ease prices for properties that do make it to sale. The highest vacancy levels are being seen in the city’s more upscale neighborhoods, some of which are experiencing vacancy rates as high as 48%. For more on this continue reading the following article from Property Wire.
Mumbai’s residential real estate market has stagnated with only 45,000 apartments sold in the city’s metropolitan region during 2011/12, well below the market average of 80,000 units annually.
The market has an unsold inventory of 80,000 flats valued at Rs 1.05 lakh crore, according to the latest research report from Knight Frank. Buyers have largely kept away from the market expecting an imminent drop in prices in the near future, it says.
Sales in the financial year 2012 dropped by more than 60% from its peak in 2007 and 35% from 2011. ‘This steep drop in absorption levels should have resulted in a similar correction in prices. However, a regulator imposed supply crunch through delay in approvals ensured that market equilibrium was maintained. Thus, an even greater fall in units launched effectively offset the impact of prices,’ the report explains.
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The number of apartments being launched on the market has also fallen, About 55,000 flats were launched in so far in 2012, down almost 40% from the 92,000 units launched the previous year.
‘Supply was also constrained as developers actively delayed project launches and looking to liquidate current inventory before launching any fresh product to ease pressure on prices going forward,’ the report adds.
Increasing costs of land, labour and raw material prevented developers from cutting prices as they were already hard pressed to maintain their current operating margins of 30 to 35%.
‘The core of the residential market is steadily shifting northward. People are prepared to move further away from the commercial business districts to find an apartment that fits their budget,’ said Samantak Das, Knight Frank director of research and advisory services.
South and central Mumbai, which only offer premium apartments, are experiencing highest vacancy levels. Navi Mumbai, the peripheral western suburbs and Thane have seen a comparatively higher number of projects launched in the two previous quarters, causing vacancy levels to spike there too.
Vacancy levels are as high as 48% for units launched in the Rs 2 crore and above price bracket.
This article was republished with permission from Property Wire.