Focusing On Lower Configurations Is The Solution For Affordable Housing

Mumbai has a high demand for residential housing. However, Mumbai also faces the inherent problem of high priced housing units which adversely affects sales. This is a prime reason of worry for developers. Mumbai has a high inventory pile up of 67,000 residential units. Focusing on developing lower configuration houses (1 and 2 BHK) is the best solution says property consultant Jones Lang LaSalle.

Rising property costs

Mumbai currently contests with Delhi to be the most expensive city in India in terms of property pricing. However, there are important contributors for these increasing prices. High costs of labour, raw material, finance, inflation land acquisition and other new kinds of expenses such as interchangeable FSI make it difficult to bring down property prices below a certain point. Apart from these, there are costs associated with particular localities, and amenities available in the properties that cannot be brought down.

Property prices affect sizes

Mumbai has seen a recognizable change in property sizes since its development as a city. The city has seen two kinds of buyers. The first kind is more concerned about a particular locality and is willing to compromise on property size. The second kind of population is the opposite. Most people who moved to suburbs and extended suburbs are the second kind of population.

Developers who started developing properties here understood this and started developing apartment configurations of 2 BHK and above. Larger configurations included better amenities within and outside apartments. Consequently, prices for these apartments went up due to premium charges. Initially, these apartments attracted only a select set of customers. However, more people wanted these amenities and were willing to pay more. This further pushed up the property prices.

This trend went well till 2008. New launches were met with equaled absorption. However, rising prices slowly started putting several apartments out of common man’s reach between 2003 and 2008. Post 2008, property prices further increased by 36%. Hence, people who could afford a 2 BHK earlier had to now settle down for a lower configuration apartment for the same cost.

Present situation

High property prices in Mumbai have reduced demand for larger apartments. Developers too have limited options for reducing prices. The simplest option now is to focus on small apartment configurations and sell them at cheaper prices. These smaller apartments may not provide all the amenities which were once available. But, they will at least make apartments more affordable.

While this addresses the concern about future options for affordable housing, one concern will still linger around in the minds of developers for some time. That is about the huge pile up of unsold inventory. The only options available for them would be either sell them at cheaper prices or sit on them indefinitely.