Originally published in the Times of India on the 29th of November, 2011
Residential sales have plummeted since 2007 as record home prices and higher interest rates have dampened demand, finds a report by a global real estate consultant.
"Coupled with regulatory delays in approving new projects, nearly 70% of flats that cost approximately Rs 75 lakh are lying unsold. Around 63% of this unsold inventory is in Thane, Navi Mumbai and in the western suburbs beyond Borivli due to the advent of mass housing projects. People had relocated to these suburbs to find an apartment that fitted their budget," said Samantak Das, national head of research at Knight Frank, in his report. "South Mumbai localities such as Prabhadevi account for 3% while the central and the western suburbs account for 10% and 23%, respectively."
The report also states that the investors' segment has been reducing its real estate portfolio. Unsold flats are estimated to be around 27% of the under-construction stock.
Prices have been moving in a narrow range in the past four quarters with developers holding on and buyers playing the waiting game. It has been observed that prices in premium micro-markets tend to be much more volatile compared to the suburban micro-markets. "Prices in south and central Mumbai locations such as Parel, Lower Parel and Mahalaxmi have declined 5-15 % over the past nine months while prices in Navi Mumbai, Thane and the suburbs of central and western Mumbai have been stable or moved marginally upwards," the report said.
Developers have been more open to negotiations in the premium segment, reducing prices by as much as 25% in favour of a sizeable upfront payment.