Mumbai's Residential Property Market on the Brink of Price Reduction

Mumbai's residential property market is likely to stabilise and may see a 10-15% price drop as developers struggle to sell flats at current 'unimaginable' rates. The sales of residential property in the city have been declining, with November witnessing the lowest number of transactions since June 2009. The trend is most pronounced in the premium segment, with prices beyond Rs7,500 per sq ft, seeing a significant decline.

Key Takeaways:

• Sales of residential property in Mumbai have been declining continuously, with November witnessing the lowest number of transactions since June 2009.
• The number of documents registered in the office of stamp duty registrars has shown the steepest fall for 2010, standing at 5,134 in November.
• Analysts suggest that a price reduction is in the offing, with prices potentially dropping by 10-15% in the coming months.
• Real estate consultants, however, believe that prices will stabilise or witness a small correction, rather than a drastic drop.
• The premium segment, with prices beyond Rs7,500 per sq ft, is seeing a significant decline in sales.
• Developers are struggling to sell flats at current rates and may need to reduce prices to attract buyers.
• Home loan majors like HDFC and SBI have seen a drop in mortgage loan transactions, with HDFC witnessing a 15-20% decline in the island city.
• The Reserve Bank of India is watching the banks tightly, and developers may need to repay loans or reduce prices to avoid defaulting.

Statistics:

• The number of documents registered in the office of stamp duty registrars in November 2010 was 5,134, the steepest fall for 2010.
• Sales of residential property in Mumbai have declined continuously since June 2009.
• The premium segment, priced beyond Rs7,500 per sq ft, saw a significant decline in sales.
• HDFC witnessed a 15-20% decline in mortgage loan transactions in the island city.
• The Reserve Bank of India is watching the banks tightly, with 91 days being considered as default.
• Private equity rates are higher compared to traditional lending rates, making it expensive for developers to secure funds.

Sources:

• DNA (Daily News & Analysis), 2010. "Mumbai's wait-and-watch approach sticks when it comes to buying residential property. IT IS likely to stabilise and may see a 10-15% drop as developers find it increasingly difficult to sell residential flats at the present 'unimaginable' rates. Sales of residential property in Mumbai continue to decline, with November witnessing the lowest number of transactions since June 2009."
• Jones Lang LaSalle India report, 2010. "After having dropped sharply during the slowdown, launches in the segment started reviving towards mid-2009 and spiked sharply in the December quarter of that year to 2,750 new apartments."
• DNA (Daily News & Analysis), 2010. "An analyst tracking the data said developers are trying their best to paint a rosy picture. 'Since June 2009, when sales started recovering, this is the lowest ever registered. Also the numbers have been going down since July 2010.'"
• DNA (Daily News & Analysis), 2010. "Home loan majors like Housing Development and Finance Corporation (HDFC) and the State Bank of India (SBI) have seen a drop in mortgage loan transactions. HDFC has seen a drop of 15-20% in the island city..."
• DNA (Daily News & Analysis), 2010. "A senior banker from the largest private lending institution says, 'Developers cannot hold on to prices anymore. The banks will insist on repayment of loans and nobody will go for rollovers because of what has happened recently (the LIC housing scam and fall in home loan numbers in Mumbai)."