Mumbai realtors jack up prices of new properties even as sales hit a trough

If there is one market which defies principal of economics it’s Mumbai, the country’s top property market by value. The real estate market in the country’s financial capital has been reeling under stagnant sales and pressure to deliver delayed projects but that has not stopped builders from raising prices of new projects. 

According to separate reports released by brokerages tracking realty segment, developers in Mumbai Metropolitan Region (MMR) have increased rates by 5-15 per cent over the last six months.

Adhidev Chattopadhyay, research analyst with HDFC Securities, wrote in his report, “Quoted prices were ~5-15% higher against the April 2013 expo (Mumbai Property Expo), with prices in a few projects remaining flattish over the past six months. However, a fresh round of price hikes since April 2013 continued to dampen buyers’ sentiments with minimal discounts on offer.”

The financial capital of the country commands the highest weighted average price per sq ft for a residential apartment at Rs 11,765. 

Bhaskar Chakraborty and Mohit Agrawal, institutional research analysts at India Infoline, wrote to their clients, “Residential prices increased 13 per cent in the past one year across major micro markets in Mumbai.”

The duo added, “We remain bearish on sales uptick during the festive season as developers play the waiting game and do not offer discounts strong enough to lure back buyers.” 

The developers who have increased prices in their various projects include Hubtown (which has raised prices for its four projects under construction by 4-18 per cent), Dosti Group, Kalpataru Constructions, Chaubey Realties, Falco Developers, Kanakia Spaces, L&T Realty, Lodha Developers, Manh Group, Marathon Realty, Runwal Group and Sunteck Realty. 

Over 150 projects were showcased as part of the Maharashtra Chamber of Housing Industry (MCHI) property exhibition in the city but over 86 per cent of the projects were priced above Rs 80 lakh.

Ashutosh Limaye, head-research and REIS, Jones Lang LaSalle India, says, “We have seen appreciation in the region of 2-3 per cent but if we adjust it against general inflation, it is nothing. At the same time sales in the city have declined steadily over the last three quarters of this calendar year.” 

According to Limaye, Q3 CY2013 has been the worst quarter for realty sales in India with less than 40,000 units being sold across the country’s top hubs. 

Mumbai is trailing behind all major metros which include Bangalore, Chennai, Delhi NCR and Pune.

Though freebies and discounts have been put on offer by some developers and prices are flattish for a few projects, Mumbai has also witnessed drop in new launches, says Pankaj Kapoor, managing director of real estate research consultancy, Liases Foras.

In terms of inventory pile up, too, Mumbai leads the pack with an unsold inventory of over 48 months which is closely followed by Delhi NCR at 38 months. 

Kapoor says ideally any city should have inventory of only 8-11 months. 

“Developers in Mumbai have higher quoted rates but they are offering discounts and if they see a viable transaction, they are willing to reduce rates. On an average, we have seen some developers offering discounts of 5-10 per cent,” he said. 

Though ads for property price discounts have been hoarding the city, it has not translated into sales. Data from Liases Foras indicate that sales last quarter were the worst ever in last three years for Mumbai. The data would be released next week.

(Edited by Joby Puthuparampil Johnson)

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