Pre-elections Hit Mumbai Realty Hard
Pre-election times are always hard for the real estate sector in India. This is because, policy decisions pretty much slow down till a new government is formed at the Centre. As such, realtors who wait for policy changes have to wait longer. In Mumbai, where the real estate sector is already hit hard, pre-election times have added to the woes of real estate developers.
Election uncertainties reduce investments
Investments in Mumbai have taken a huge hit, primarily due to election, political uncertainties and possible regulatory changes. Investments in office spaces went down by 77 per cent while investments in land went down by 61 per cent. The overall investment in Mumbai’s real estate sector has declined over the past few months mainly owing to political uncertainties, especially during the first quarter of 2014.
The month of January witnessed about 20,450 property registrations in Mumbai while February witnessed only about 17,380 registrations, a decline of 15 per cent. The revenue earned by the city from property registrations too fell in February compared to January. Interestingly, the scenario is not as bleak as Mumbai’s scenario either in NCR (National Capital Region) or Bengaluru.
Pre-elections affect Mumbai realty
Most investors in Mumbai realty are playing the wait-and-watch game to see the direction of the city’s real estate once the Lok Sabha elections are over, as the new government has the power to make important policy decisions as well as decisions about the land acquisition bill and real estate regulatory bill, which have major implications for the real estate sector.
Pre-elections are also times when the movement of files halt. As such, many policy decisions get shelved till a new government is formed at the Centre. Real estate developers bear the brunt as officials hold back on routine approvals citing the election code of conduct. Deployment of officials on election duties further delay approvals. A two-month delay in approvals result in almost 5-6 per cent project cost escalation according to developers.
One relief however is that none of this indicates a weak sentiment by investors, as private equity still continues to grow. The economy is also expected to become stable post elections, bringing renewed interest in the realty sector in Mumbai as well as the entire country.
The fall in property registrations and revenue earned during the first couple of months of 2014 are clear indicators of the effect of Lok Sabha elections on Mumbai’s realty. While one can expect the sector to improve during the second half of the year, the wait-and-watch approach of investors can be expected to continue till the elections are over.
