New Launches, Stable Prices: Is It The Right Time To Invest In Mumbai?

Mumbai has always been known as the most expensive real estate market in India. With properties being priced so high, the home buyers have been awaiting more affordable options. To suffice this need many real estate developers are now launching project that offer 1BHK and 2BHK apartments at a lower price as compared to the standard per sq ft market price.

The new launches

Rupji Daffodils is one such project, which offers 1BHK apartments in Andheri (West), a popular Western suburb in Mumbai. The project, which is yet to be launched, is priced at Rs 84.3 lakh for an apartment with an area 625 sq ft. This project is priced at around Rs 13,400 per sq ft, which is on the lower end of the property prices in Andheri West - Rs 13,000 to Rs 20,000 per sq ft.

Geeta Sky is yet another project, which once launched, will offer 1BHK and 2BHK apartments at Mira Road, deeper into the Western suburbs. The project will sell the 2BHK apartments at Rs 50 lakh each, taking the property prices at Mira Road to Rs 5,000 per sq ft. The average property prices here range between Rs 6,000 to 8,600 per sq ft, making this project an affordable option for people to invest in Road area.

Is unsold inventory the trigger?

While there will be no drastic change in the final prices of properties, which are a part of the unsold inventory in Mumbai, new launches seem to have taken a cue from the serve Bank of India (RBI) Governor Raghuram an who asked builders to reduce prices.

According to a report by Bank of America-Merrill Lynch titled 'Acres to Sq feet 2QCY15', unsold inventory represented in number of quarters has fallen from high of 13 quarters in the second quarter of calendar year 2014 to 10 quarters in the same period in 2015.

“We attribute this dip to new launches at attractive prices by key well-known developers. However, we reiterate our view that overall residential market is still weak and is expected to remain so over next three to four quarters at the least. We believe projects by developers with good brand-value and execution track record will see better sales velocity,” the report said.

Additionally, according to the real estate performance report by PropTiger Data Labs, the unsold inventory in Mumbai city presently stands at 66,400, 31,175 in Navi Mumbai and 54,000 in Thane district, taking the total to 1,51,000 in Mumbai and its suburbs, together.

Are metrics improving?

With developers pricing the new projects aggressively, the market experts expect the prices of more new launches will be in the stable zone. However, the latest trend is not likely to a significant effect on the property prices in Mumbai as the number of new launches has dropped and hence, make a small percentage of total number of unsold units. In the first quarter of current financial year, the new launches in Mumbai city fell by 58 per cent and by 93 per cent in Navi Mumbai. In , however, it went up by 31 per cent, which might help stabilize the pricing in central suburbs of Mumbai.

There are, however, signs of slight improvement in the metrics. “The year-on-year affordability (calculated as ratio of monthly mortgage payout to monthly income) improved in Mumbai city, primarily led by slowdown in the price growth of residential properties, mortgage rates softened from peak of 11 per cent in the first quarter of 2014 to 10 per cent in the second quarter of 2015; and rise in average annual income,” said the report by Bank of America-Merrill Lynch.

Not yet affordable

The prices of property in Mumbai are showing signs of climbing down the ladder, but they are yet to drop enough to fall in the affordable category, where middle-class home buyers consider making an investment. This is holds true with homes, which are ready-to-move-in, as well as homes, which are under-construction. A significant portion of this inventory is priced above Rs 4.65 crore per home. This is way above the price for affordable homes, which is pegged Rs 50 lakh and below.

al estate developers in Mumbai have been concentrating on the premium and luxury market especially in the prime areas of the city. These two elements together contribute to higher prices of property, while the absorption rates are much lower.

Of the total Mumbai's unsold inventory, 73,901 homes are in the affordable category, which is nearly half. This is a direct indication that sales across the board have come down indicating that price is not the only reason for slowing sales.

However, there is a lot of pent up demand for affordable homes in Mumbai. Unfortunately, a majority of the units that are priced below Rs 50 lakh are in the remote areas of the city with low livability index such as Panvel or Khandeshwar (the deep-end of Navi Mumbai), Virar or Bhayander (far ahead of Western suburbs), and yet-to-be-developed areas of Thane municipality.

Moreover, the civic infrastructure of Mumbai has not developed at pace with, which the real estate developments have.

kars sure need homes that they would like to own and which are affordable. But, the need is to have these homes closer to the city limits.

(Katya Naidu has been working as a business journalist for the last nine years, and has covered beats across banking, pharma, healthcare, telecom, technology, power, infrastructure, shipping and commodities)