Buyers stay away from high-value homes : Hindustan Times

MUMBAI: 

Despite an overall improvement in economic sentiments, there has been only a marginal growth in residential real estate off-take in Mumbai and things have remained slow even in the premium-end of the market, say real estate analysts and developers, as consumers continue to wait for a further reduction in interest rates for a cheaper home loan.

“After almost eight quarters of slow movement of inventory in Mumbai, marginal improvement was witnessed in select micro markets at the introductory level. Retail buyers as well as investors are shying away from high-valued apartments,” says a recent report by real estate consultancy Colliers International India Research.

The Mumbai Metropolitan region has unsold inventory — houses that have not been bought — of close to 168 million square feet, which will take 45 months to sell. This is more than ideal inventory levels of not more than 12 months, says another consultancy Liases Foras.

This trend is considered significant as transactions in the Mumbai real estate signal a direction for retail purchases and also induce developers in other regions to alter their marketing strategies.

There has been oversupply in some pockets like central Mumbai, where there are multiple luxury projects under development. Despite slow demand, residential real estate prices in Mumbai rose in the JanuaryMarch quarter, according to Colliers International.

While prices in south Mumbai and central Mumbai rose 1-3%, those in the Western suburbs were up 3-8%, it pointed out. Developers attribute varied reasons for the price increase.

“The cost of construction hasn’t come down and government charges have also increased over time. Therefore, prices in Mumbai remain high,” said Deepak Goradia, vice-chairman and managing director of Dosti Realty, one of Mumbai’s largest real estate developers.

“The rise in house prices in the suburbs could also be due to improved connectivity to the business districts of south Mumbai and Bandra- Kurla Complex,” said Kamal Khetan, chairman of Sunteck Realty.

Real estate companies are also using various schemes like 20:80 — pay 20% up front and rest on possession — to lure potential buyers and fence setters. Some are tying up with home loan companies to provide low interest rate loan schemes, while others are offering discounts on registration and stamp duty to boost sales.

But volumes are still low. “The market has been slow. The time that customers are taking to make home buying decisions is still longer,” said Goradia.

Some say overall sales have shrunk to only a few good players who have all approvals in place and the financial strength to complete projects. “Potential buyers are waiting to see the turn of events like a positive shift in economy and more rate cuts to improve the home loan scenario,” Khetan said.