MMR: Builders Increase Efforts to Revive Tepid Residential Market
Even as the Maximum City gets ready to welcome the monsoon in a few weeks, dark clouds continue to hover over the residential property market. As many as 1.69 lakh housing units are unsold in the Mumbai Metropolitan Region (MMR). Property prices in the MMR have dropped by the maximum among leading metros during the quarter ended 31 March 2015.
Weighted average price per square foot has seen a 2.10 percent decline, according to the report by Liases Foras, a property research and consultancy firm.
The average price per square foot has fallen to Rs 12, 835 in the fourth quarter of the financial year 2014-2015 from Rs Rs 13,121 in the previous quarter. But despite this decrease in per square foot cost, the weighted average price of a new house in MMR continues to be steep at Rs 1.29 crore ( down from Rs 1.32 crore in the previous quarter) while it is Rs 2.95 crore within Mumbai municipal limits. In fact the maximum inventory is for flats that cost upwards of Rs 2 crore.
Builders seek change in rental rules
The current bleak market scenario has forced builders to think out of the box and come up with a new way to earn money now and repay their debts. They have now approached the Maharashtra government seeking changes in the Leave and Licence Agreement rules in a desperate bid to clear inventories.
Builders are now seeking to rent out their unsold flats as ‘service apartments’, for those intending to take homes on rent for a short span of time, to earn some money during the current slowdown in the market.
There are currently five lakh luxury homes unsold in the city. When these flats are not sold, builders are unable to repay banks and other financiers their loan amount. To get respite in the prevailing condition, builders have approached the government saying they want to rent out their flats as service apartments for which they want the Leave and Licence Agreement tweaked.
For instance, if the cost of an apartment is Rs 2 crore, they will give it on a monthly rent of Rs 30,000. The builder will start a full-fledged service for these apartments where the needs of the tenant will be taken care of by the company. Services such as requisite furniture, cleanliness, maintenance of the apartments, water and parking facilities will be provided by the builder to the residents.
This could be a win-win situation for both the builder as well as the tenant. The rents from these apartments will reduce their financial burden considerably. At the same time, it will be a new option for those who want apartments for a short period of time, but do not want to pay exorbitant prices.
New schemes to attract buyers
While buyers find the prices too high, builders are holding on to their high prices and flooding the market with a flurry of new project launches, and trying to sweeten their offers with several new schemes. With enquiries for residential property rising, builders hope the market would recover in the coming months, though many of them are wooing potential customers by offering discounts, freebies, waivers and attractive schemes to book orders.
Several schemes are also being offered, especially in pre-launch projects. These include the popular ones like 20:80, 30:70, 10:80:10 and 5:80:15. Such schemes remain popular with many buyers although they have to pay higher base prices as compared to buyers who opt to pay a large chunk of the capital value right at the outset.
In some areas, builders are offering discounts up to 10 per cent on the base price of a property to buyers who are serious about making purchases. Other buyers can negotiate floor rise charges and can get them waived off by the authority concerned
Responding to the changing market dynamics, developers are launching residential projects to fit the demand of the customers. Builders are reducing the size of apartments to suit a large section of buyers.
The first quarter of 2015 witnessed the launch of 17000 units. This is the second highest number of housing units since 2010, during which 21,000 units were launched. The residential projects that have been launched cover most of MMR, including Dombivli, Kalyan, Panvel, Mulund and Central Mumbai.
