Mumbai Property Market

We had carried out survey of Mumbai property market and the take away points are:

Price rise despite weak property market:

This has been the case despite weak demand, the main reasons being: a) rising input cost b) delay in approvals and increase in incidental cost due to revision in plans due to change in regulation. C) Leveraged developers covering their finance cost. D) Very few developers are offering on spot discounts.

Limited near term supply to keep price high:

Only 9% properties are in ready possession. More than 60 % of projects are scheduled for delivery post 2015. Delay in possession dates of projects. Delay in projects is due to delay in approval process. Projects announced by renowned brands such as L&T, Lodha witnessed robust sales in 1QCY13.

Rates quoted on carpet area basis and 20:80 schemes offered by developers:

Most of the developers have started quoting rates on carpet area basis for better transparency. Efficiency in Mumbai apartment range between 60-70 % and super area built up is calculated as 143-150 %. No developer has officially cut base prices as yet. However, many developers project 20:80 scheme whereby buyer pays 20 % upfront while booking and 80 % on possession. Further freebies like stamp duty waivers, floor rise waivers are offered to attract buyers.

Not much rate cut benefits passed to end consumer:

Even though RBI has cut interest rates by 100 bps in last 1 year, not much benefit has been passed to end consumer. Average loan rate currently is 10.5% vis a vis 11 % in Nov 11.

1% change in interest rate result in 6-7% change in EMI for a 20 year loan.

Sales registration have shown YoY a degrowth in 19 out of 25 months ending Feb 13.

Steady growth in leave and license registration indicated more people prefer to stay in rented apartments than buying homes.

(Source: Prop Equity)