Residential property prices in Mumbai, India are set to fall 30% or more after an already-disappointing year, according to analysts. Projections indicate that the glut could extend into 2012 and 2013 with new developments arriving on the market. Learn more about this in the full article by PropertyWire.
Slow sales and a glut of properties are set to hamper the residential real estate market in Mumbai, India, and prices could fall by a further 30% according to analysts.
The glut is likely to extend into 2012/13 as steady streams of new developments are launched on the market, according to real estate consultants Jones Lang LaSalle. Developers who bought land at high prices are now having to bring prices down.
‘The overall sentiments of the market and the consistent rate of new project launches in Mumbai give a clear indication of an impending oversupply by 2012. A lot of developers in the most severely affected locations are currently open to closing sales at lower rates,’ said a note by JLL.
Prices for commercial properties slumped in the Indian city in 2009 and many developers switched from offices to residential in the hope of keeping profits high. But now this sector is slumping too.
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‘Over the past 12 to 14 months, developers from Mumbai and Delhi started focusing on their home markets and launching a substantial number of residential projects. Land was bought at expensive rates and if sales continue to remain dull for longer, there would be a 15 to 25% correction,’ said Sanjay Dutt, chief executive officer business at JLL India.
Dutt added that of the total recent residential sales about 65% of flats in Delhi and 35% in Mumbai have gone to speculators. These flats are also expected to roll back into the market.
According to JLL, real estate prices have already dipped in Parel, Lower Parel, Mahalaxmi, Bandra east, Andheri east, Goregaon east, Kurla and Mulund. The agency points out that after surpassing the peak values of 2008 by 20% by way of correction, the property rates have now slumped back to peak 2008 levels.
‘After surpassing the peak valuations of 2008 by 20% in 2010, Mumbai’s residential property rates today are back on par with the 2008 benchmarks. This could be considered a correction due an increasingly urgent need for capital by the city’s developers,’ explained Dutt.
‘It is fairly certain that this correction phase will continue for the next three months and inevitably extend into the traditionally slower monsoon-cum-vacation period,’ Dutt added.
However, analysts tracking the prices and unsold flat inventory levels said the fall would continue for a longer period and prices would remain stagnant for some time because the industry hiked prices in a hurry to make quick profits soon after revival of the sector.
‘For Mumbai, I am expecting a further correction of up to 35%. There may be a case that you could see 25% correction in the next two quarters and then prices would not appreciate for the next year or so,’ said Pankaj Kapur, chief executive officer of real estate research firm Liases Foras.
This article was republished with permission from PropertyWire.