Mumbai residential property registrations hit lowest in almost five years in November

Mumbai city, the country’s top property market by value, has recorded the lowest number of residential property registrations for November in almost five years, reflecting compression in demand in anticipation of a decline in prices.

Property registrations in the financial capital and its suburbs during November 2013 declined 22 per cent compared with October and 12 per cent over November 2012 to just 3,842, as per the latest data available from the Director General of Registrations.

According to a report released by HDFC Securities, it is the first time since the August 2008-April 2009 period that the monthly residential property registrations has dropped below 4,000 units mark, reflecting the pain in the Mumbai property market.

Also the three-month moving average for monthly property registrations in Mumbai, which improved to nearly 6,443 units as of May 2013, declined to approximately 4,285 units in November.

Adhidhev Chattopadhyay, research analyst with HDFC Securities, said, “Although property buyers in Mumbai continue to postpone purchases in anticipation of a price correction, we believe that recent developments on the regulatory front will constrain supply in CY14, leading to further delay in price correction. This is on the back of slow approvals over CY12-13 on account on introduction of the amended DCR for Mumbai city and suburbs.”

However, property registrations for the first eight months of the current fiscal ended November 30, 2013 managed to grow 6 per cent to 39,790 units from 37,513 in the same period the previous year, led by 16 per cent growth in main city even though growth in registrations in Mumbai suburbs was muted at just 4 per cent.

A senior research analyst from an international brokerage, who did not wish to be identified, said, “November and December are the most active months for real estate transactions in the city because the government introduces the new ready reckoner rate from January and people tend to close transactions during this period. If we go by the data then it’s a clear sign that the market is hitting a rock bottom and prices need to correct by another 10 per cent or so.”

Though numbers tend to show a gory picture of the business situation for developers, realtors are keeping a straight face and indicate that sales for their projects have been good or phenomenal. Most developers indicate that they have been recording strong sales in the suburban areas of Mumbai.

Chattopadhyay of HDFC Securities says, “Although Mumbai city and suburbs continue to see weak launches and volumes on account of elevated prices, Mumbai’s extended suburbs which includes Thane and beyond region continue to see strong sales off-take.”

Some of the significant projects which clocked sales include Kalpataru’s Thane project and Lodha Group’s Dombivli project launch called The Rise.

Apart from exorbitant prices, which has acted as deterrents for buyers, in the last calendar year the Brihanmumbai Municipal Corporation (BMC) halted approvals on account of recent Supreme Court directive to do away with podiums being counted as open spaces and requirement of higher width of open spaces at ground level.

The government has also made it mandatory that 20 per cent of any housing project be reserved for low-income group (LIG) housing.

Pankaj Kapoor, managing director, Liases Foras Real Estate Rating & Research Pvt Ltd, said, “The market sentiment is very bad as our September quarter data indicate that unsold inventory touched the high of 58 months. It has been the worst performance since Q1 CY2009.”

He said, “My outlook for the October- December (2013) quarter is that the numbers will be down further and it will be lower than 2008 levels, which was the worst phase for Mumbai realty market.”

Industry experts indicate that even if developers want to reduce prices to clock sales they are caught in a catch-22 situation as cost of construction has increased. Earlier, while protecting margins developers did not bring down the prices but since 2009 ready-reckoner prices in the city have increased by over 350 per cent.

With increasing inflationary pressure and expensive debt that developers have taken on their books from non-banking financial institutions, private equity funds and grey market, the industry is now bracing towards increasing litigations and relationships between developers and fund managers going sour.

(Edited by Joby Puthuparampil Johnson)

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