- 17,000 ready-to-occupy homes for sale in Mumbai; 1.50 lakh to be delivered in next 3 years
- Overall unsold inventory would fill 2,300 football fields or 7,700 cricket stadiums
- 46% of supply in Q2 2018 was affordable housing
- Cash creeping back into realty, but pace curtailed by the new regulatory environment
Real estate is close to the heart of most Indians who at some point want to buy or sell a property. The reasons could be emotional and investment-driven, and often both. And, of course, nothing defines Indian real estate quite like Mumbai does.
Call it by any name you want to – India’s financial capital, Maximum City, or the city of dreams and opportunity. One thing is sure – it is India’s most expensive housing market. Property prices here had increased by as much as 7-10 times over the past 20 years.
Today, the average number of monthly incomes required to own a home in the city is the highest among its other counterparts. Depending on where in Mumbai you want to buy a home, you are putting anything between 67-90 times your entire monthly income on the line.
While Indian real estate is rarely out of the news, probably no city’s real estate market gets as much media attention as Mumbai’s. That’s not surprising, considering that merely 5 per cent of the people living in the city today can actually afford to buy a home here, either outright or with a home loan.
Mumbai sees roughly 50 new people coming to live and work in the city every hour. Approximately 2-3 lakh Indians arrive in the city every single year, looking for jobs or to make their entrepreneurial dreams come true.
However, the city itself is not growing in tandem. It is hemmed in by water on three sides and cannot accommodate the circular kind of development – the kind that spreads outward from a central focal point – that we have seen in most other Indian cities. In Mumbai, development can literally take place in only two directions – from the south towards the northern suburbs, and upward.
The Problems with Going Vertical
While building super-tall skyscrapers is one way around this limitation, how many can one build before the whole system breaks down? A fully-occupied 40-storeyed skyscraper with 1600 apartments roughly consumes 6.5 lakh liters of water and 4,800 kilowatts of electricity per day. Each new apartment must now by law have a car parking space, and the building itself must have a minimum saturation of amenities that make life worth living in it.
Moreover, every skyscraper puts immense pressure on the existing traffic infrastructure – and creates yet another urban heat island that degrades Mumbai’s already depleted environment even further.
The Bane and Boon of Speculators
The major factor responsible for sky-rocketing prices in Mumbai were the speculators – investors who bought homes with the sole objective of selling them in the short-term but earning the fattest-possible profit. Speculators made Mumbai their Mecca because of the impossibly high property prices, and they drove the prices even higher.
Many are tempted to believe that it is the developers who are responsible, but they are responsible only to an extent that they avidly courted speculators, because they could sell many flats off to them in bulk.
By the time everyone realised the long-term implications of speculative activities, the damage was done. Today, Mumbai is right up there with Tokyo, New York and London as a city where everybody wants to live and very few can afford to, except perhaps in the most constrained conditions.
One of the major developments seen in Mumbai real estate in the recent times was the slight price correction – meaning that Mumbai’s notoriously unrelenting and ever-increasing property prices first stopped growing and then began falling. Over the last 3-4 years, prices in the city have dropped anywhere between 3-5 per cent across several areas.
In the last one-and-a-half years alone, property prices corrected by 2-3 per cent. One of the major reasons for this was the new regulatory regime implemented by the central government including DeMo, RERA and GST. This correction in property prices was largely seen in the secondary market where investors were in a hurry to exit.
Meanwhile, the developers became more focused on launching only those projects that were high in demand – affordable housing. As per ANAROCK data, out of the total units launched in MMR, a whopping 46 per cent comprised of affordable units in Q2 2018.
By Anuj Puri, Chairman – ANAROCK Property Consultants