As published on www.indianexpress.com on 25th April, 2012
Just when it was believed that the only direction the exorbitant realty prices could slide is downwards, property prices have inched up even further. The average cost of an apartment in Mumbai has just peaked to Rs 2.60 crore.
This is almost a 20 per cent jump from March 2011, according to figures compiled by the real estate research firm Liases Foras. The weighted average price of a new house within the municipal limits of Mumbai — from Colaba to Mulund, Dahisar and Mankhurd — was Rs 2.18 crore at the end of the previous financial year. In terms of per sq ft rates, the average cost last year was Rs 14,733 and as on March 2012, it has leaped to Rs 17,536 per sq ft.
A recent report by Knight Frank termed Mumbai as the least affordable of 63 cities worldwide, a conclusion arrived at after comparing the per capital annual income and the cost of a premium apartments in Mumbai. According to Pankaj Kapoor, CEO of Liases Foras, price correction, if any, has been very sporadic in a handful of projects.
A majority of projects offer concessional rates during the pre-sales, the initial stage when even basic building permissions are not in place. The risk element attached to these deals ensures that only investors get the benefit of such offers and when the project is finally launched for the end-users, it is priced at a higher market rate.
Kapoor said developers continue diverting the money received from investors into purchase of new land instead of using it for completing construction, despite restrictions by the Central Bank. “In the end, the investors are going to be stuck badly as the developers’ own equity in the project is very low. The projects will be delayed and developers will frustrate investors by blaming it on approval delays,” said Kapoor. He said the recent RBI measure to reduce the interest rates marginally will not lead to any spurt in sales and will only bring some respite to existing home loan-payers.
Overall in the Mumbai Metropolitan Region (MMR), comprising Mumbai, Thane, Navi Mumbai, Kalyan-Dombivli, Vasai-Virar and Mira Road-Bhayander, the average cost of a flat is still prohibitively high at Rs 1.12 crore. The unaffordable prices have ensured that there is a huge pile-up of inventory, with the number of unsold houses in Mumbai as high as 1.13 lakh units currently.
This translates into 129 million sq ft of unsold residential space, according to Liases Foras. The numbers have gone up to such an extent also because of the fact that after a prolonged lull, owing to uncertainly about building regulations, as many as 115 new projects were launched in the MMR in the first quarter of this month