Why Do Mumbai Property Rates Keep Soaring?

Mumbai surely has the dubious distinction of being among the most unaffordable property markets in the world. This unaffordability factor did play a major role in inviting the curse of a slowdown upon many real estate markets that started unfolding in early months of the year 2014. As would be evident soon, the whole sector would have to bear the brunt of this. Home sales fell as prospective buyers decided to sit on the fence till developers gave in and reduced property prices. This would improve by and by as developers, along with a solid support from the government, try to correct rates. One measure after another was introduced to make the deal sweeter for buyers. By and by things would improve. However, this is not to indicate that the real estate in Mumbai would get any less pricey.

Data by the National Housing Board show average property prices in Mumbai stood at Rs 21,692 per square foot (sqft) in the fourth quarter (Q4 or March quarter) of the financial year 2016-17 (FY17). In the same quarter of FY14, average property prices in Mumbai stood at Rs 17,666 per sqft, the NHB Residex shows. Between this period, prices have only moved upwards, even if the increase has only been marginal. This stands in contrast with the price movement witnessed by property markets of Delhi, where rates have come down from the levels seen in FY13.

Apart from the obvious differences what else makes Mumbai, India's financial capital, different from Delhi when it comes to real estate? Why do prices refuse to come down while buyers cannot resist investing?

• Unlike Delhi, the Maharashtra capital has seen many new developments in the recent times.  This is remarkable for a city that is surrounded by the sea, and where space remains a key issue. New legislations have been introduced to rationalise FAR (floor area ratio) norms to allow builders to construct taller buildings. This means buyers have the option to stay close to the city centre. In such a scenario, prices may not see a substantial correction.

• Delhi real estate may have lost to the real estate markets of Noida and Ghaziabad which are more affordable and offer-brand-new constructions. But, that is not all. These two centres are also quite well connected with the national capital through road and Metro networks. The travel, too, is only reasonable. The same is not true when we speak Mumbai peripheries. Owing to the geographical constraints, the connectivity remains an issue. And, even if there is a good connectivity, the travel time may be long. This means the demand for Mumbai real estate does not lose to the demand for peripheries. This in turn fuels the pricing growth.

• We are speaking of India's financial capital, where the highs and mighties of the world come and do business.  The demand is not just local, it happens to be global. The supply, on the other hand, is limited, prompting prices to move upwards. Also, Mumbai is also a top pick among the non-resident Indians for investment. The findings of a recent survey show that most NRIs prefer to invest their money in smaller cities, but Mumbai remains their top bet nevertheless.

 Also Read: Why Real Estate Is So Expensive In Mumbai