Downfall in Mumbai property rates despite growth in highrise projects
The global economic meltdown has incessantly led to slump in property rates of major cities across the nation, Mumbai, the commercial capital of India, being one of them. However, inspite of rising inventory and steady decline in Mumbai’s real estate market, multi-storeyed projects in the city has witnessed an escalating path. Key developers and builders in Mumbai have been coming up with a slew of multi-storeyed projects in the city, with the approval of the highrise committee of BMC. The committee has already cleared as many as 62 such realty proposals in the first and second quarter of 2013. This adds up to five times the number of proposals sanctioned by BMC between June-December 2012. According to realty consultants Knight and Frank, the property values in Mumbai may take a dip of 35% in the next two years. The key driver for such a decline is expected to be higher interest rates and record prices, which are likely to deter the home buyers and cause the builders to slash prices in order to offload the growing inventory.
Reason for the downfall
The rise of professional real estate investors is one of the primary reasons for the decline in property rates in Mumbai. Market reports confirm that in the last 10 years, the property market in Mumbai has witnessed a surge in the number of middle-class Indians trying to make a score in the realty sector. To add to it, increasing number of urban homes have further added to the reason for the downfall of property rates in the city. According to Ministry of Housing and Urban Poverty Alleviation, more than 11 million homes in the urban areas are lying vacant. Such properties are held out by developers with a belief that there might be an appreciation in the capital values over the time. When the inventory comes on-stream, it could contribute towards price correction significantly.
High rise committee
The high-rise committee is accountable for raising building projects above 22 storeys or 70m. The committee analyzes building proposals in regard to various factors namely infrastructure and environmental sustainability along with the mandatory open space surrounding the building. A comparatively more streamlined approval process adopted by the committee, has contributed to the submission of high-rise proposals by developers. Developers and investors have been attributing the spurt in the rise of the number of proposals due to streamlining of the approval processes by the committee.
Projects cleared by the committee
Lodha Developers, Nirmal Lifestyle, Runwal Developers, Omkar Builders, Orbit Corporation and HBS and Rajesh Lifespaces are some of prominent builders in Mumbai who got clearance for their high rise projects by the committee in the last few quarters. An overall 76 proposals for high rise structures have been received by the committee by the end of the second quarter in 2013. Among these, most of the proposals cleared by the committee are for buildings more than 40 storeys, located mainly on the island city and eastern suburbs. Property experts further corroborate that the residential property market in Mumbai will stagnate in the next few years, only if the rates decline and matches with the income levels and affordability range. According to JLL, the real estate market of Mumbai will witness a price check of 25% in the next few quarters and the prices will remain stagnant for the next two years.
