By Accommodation Times News Service
The city’s residential market is going through one of its worst phases, with about 45 per cent of Mumbai Metropolitan Region’s (MMR) ready and under construction projects lying unsold due to dwindling demand and high prices, says a report by real estate consulting firm Knight Frank. Of the nearly 2, 90,000 residential under-construction units in the Mumbai residential market, unsold inventory levels are at 1, 30,000 units, according to the report.
“Unsold inventory level in the MMR (almost 45 per cent) is way higher than that of National Capital Region (NCR) at 26 per cent, given that the NCR market has nearly twice the number of units under construction compared to Mumbai,” states the report. A majority of the unsold inventory is in the higher bracket ticket size.
The report also points out that weak demand and over supply of residential units in the city has led to an almost 10 per cent drop in property prices over the past one year in areas of south and central Mumbai. “Prices in some South and Central Mumbai locations such as Parel, Lower Parel, Mahalaxmi have declined close to 10 per cent over the past three quarters,” says the report. It adds, “Developers in a bid to liquidate their higher priced inventory have been more open to negotiation especially in the premium segment, reducing prices up to a maximum of 25 per cent in favor of a sizeable up-front payment.” The report states “Unsold inventory levels across ticket sizes in the Mumbai market are as high as 52 per cent for units launched in the Rs 2crore and above price bracket, compared to 44 per cent for the overall residential market of Mumbai.”
Hinting at a possible price correction in the future, Samantak Das, chief economist, (director-research & advisory services), Knight Frank India, said, “Unsold inventory pressure is the highest among all other cities and is depicting a growing trend. We expect a more pronounced price correction, which may drive the market to a better equilibrium”.
A lower demand, the report says, has pushed developers to keep a check on new launches. Approximately 47,488 units were launched during the January-September 2013 period this year, which is a considerable 28 per cent drop compared to the previous year. The difference is even greater at 42 per cent and 46 per cent when compared with the same period during 2011 and 2010 respectively, says the report. Meanwhile, absorption levels for the January-September 2013 period have dropped to around 39,000 units, which is a 26 per cent drop compared to the previous year and more than 43 per cent off the 2010 highs.