The article says the sale dropped 40 percent in last 4 months because of inflated prices. :bab (38):

In Mumbai, flat sales drop 30-50% in 4 months due to inflated rates

Mumbai’s builders seem to have priced themselves out of the market. Sales of apartments, on an average, have dropped between 30% to 50% over the past four months as end-users, discouraged by the high rates, are staying away or postponing their decision to buy their dream house.

But developers are not perturbed. Except in 2008, at the height of the global economic meltdown, they have been riding high on the real estate boom that started seven years ago.

According to sources, most builders have a good staying capacity and can afford to hold on to their prices despite the drop in sales.

A property expert said sales in the suburbs had fallen by more than 40%. "Investors from certain financially rich communities have formed a cartel and are driving up prices. They are trading in real estate by buying flats in bulk and selling in retail. On the other hand, the genuine purchasers are not buying flats at these inflated rates."

It is learned that many developers artificially jack up their rates by, say, more than Rs 1,000 a sq ft, and then play out the charade of giving a discount of Rs 1,000 a sq ft to a potential buyer. Moreover, in many residential projects, the difference between the built-up area and the carpet area is now almost 50%.

"Prices have reached their peak levels. Any further increase from here onwards will seriously affect the demand," said Anuj Puri, chairman and country head of Jones Lang LaSalle Meghraj, a global property consultancy firm. "Inquiries are slowing down, although commercial sales have been picking up."

Developer Sunil Mantri, also president of the Maharashtra Chamber of Housing Industry (MCHI), admitted that sales had dropped 10% to 20%, depending on the project and location. "Prices have shot up beyond the reach of the common man. The average rates have shot up by 20% to 30% since the past one year," he said.

However, Mantri claimed that sales were generally slow during the monsoon season. "We are working to boost sales in this slack period up to Navratri by way of promotions," he said.

Another developer from the eastern suburbs, who did not wish to be named, said sales had been down by as much as 50% below compared to last year. "The reason is the high prices, and the last three months have been pretty bad," he said.

Knight Frank (India) chairman Pranay Vakil said there had been a drop in volumes of outright sales. "There is resistance to high prices. In central Mumbai, a residential project which was quoting Rs 21,000 per sq ft and doing brisk sales last year, has now shot up to Rs 30,000 per sq ft with barely any transaction," Vakil said.

However, developer Nayan Shah of Mayfair Housing said he foresaw a severe rise in prices in the coming months. "The cost of TDR (transfer of development rights) has shot up and in places like JVPD, the BMC has restricted the floor-space index (FSI) to just 1 till the time housing societies surrender land reserved for public amenities. This will have a cascading effect on property rates," he said.

Source: TOI, 2nd August, 2010.
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  • This is very true but the article also mentions that "most builders have a good staying capacity and can afford to hold on to their prices despite the drop in sales" This is the actual scenario and has being going for so many months now.
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  • Agree...Most builder recover the entire project cost by selling ~30% of total inventory. It gives them the power to dictate price.

    Originally Posted by rajeshmr229
    This is very true but the article also mentions that "most builders have a good staying capacity and can afford to hold on to their prices despite the drop in sales" This is the actual scenario and has being going for so many months now.
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  • If the standoff continues for a long time, it will reach a breaking point. Hope it reaches that point very soon.
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  • Anything that goes up has to come down at certain point of time, Mumbai RE has reached its peak, common man cannot afford it anymore, how long can the builders hold on to vacant flats? I am 100% sure prices are going to fall and that too fall big time, before 2012 Mumbai housing sector is going to take a real beating. Think before investing now.
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  • There will correction for sure.. but no one can predict there will be a big fall.. Lot of political people have their black money parked in RE and will not allow a big fall... It will not be a dramatic.. but a slow fall.. I don't know how many people remember the 90's... plenty of locked houses.. depressed prices.. I think it will be similar.. 30000 to 40000 psf.. how many houses will be sold..

    Originally Posted by REDUMMY
    Anything that goes up has to come down at certain point of time, Mumbai RE has reached its peak, common man cannot afford it anymore, how long can the builders hold on to vacant flats? I am 100% sure prices are going to fall and that too fall big time, before 2012 Mumbai housing sector is going to take a real beating. Think before investing now.
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  • Got to hold your nerves for actual home users
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  • Correction will only happen when stock market crash.

    This entire RE cash flow is directly coming from BSE/NSE and not from FDI.

    Stock market won't crash until next election.. so wait for next 3.5 yrs more.
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  • Agreed...SInce selling of 30% stock recovers total cost...Rest 20% consider as gift to parties,mlas,corruption stuff

    Rest 50% is good enough to start a new project and personal spending on bmw,audis etc
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  • to a larger point, doesnt this disprove the fact that there is a nexus between the building and newpapers? I mean this artcile highlights atleast some basic resistance by media to accept the RE prices in mumbai
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  • May be, but I will tell you this real story. I had a shop in one of the malls. Once, mall manager told me... newspapers / writers will publish what you tell them to publish, if you can afford them. I can not narrate the specific incident he told me... but I don't belive media folks since then. They will do anything for the money.

    Originally Posted by donkeykong
    to a larger point, doesnt this disprove the fact that there is a nexus between the building and newpapers? I mean this artcile highlights atleast some basic resistance by media to accept the RE prices in mumbai
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  • This is hard to believe unless someone has real data. All speculation adding to anxiety for poor property buyers like us.
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  • Originally Posted by donkeykong
    to a larger point, doesnt this disprove the fact that there is a nexus between the building and newpapers? I mean this artcile highlights atleast some basic resistance by media to accept the RE prices in mumbai


    Not really. If you read the article carefully - its more of a "factual" article (house buying has dropped, builders are not bothered) rather than an "opinion". Most of TOI's articles are opinion and they have very carefully steered away from giving any in that article. If anything - the article is better for the builders than for buyers - because it flat out says that the builders will not drop their prices even though flat sales are down. Its like an open declaration by builders - on the front page of the leading national newspaper - that they are not going to come down with their prices. Well disguised and serves the builders purposes 100%.

    I for one think that the house prices will never come down unless the industry is more transparent - there is way to much "dirty" money in the business for the prices to correct.
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  • Thats a good observation... However I don't know how long the builders will hold on to prices if it simply does not sell....
    See there will be a drop on sales.. but if it persists for a year all this bravado will vanish because investors will also panic..
    I am not saying buyers will hold on.. but apartments are simply unaffordable.. I cannot dream of buying at 1 cr+ and if things get worse, I will try to move out of this city..
    Yes there will be a TV star/ movie star / business man buying at 2 crores and 3 crores.. but there are not many.. it will be 30 to 40% onlu

    Originally Posted by korchha
    Not really. If you read the article carefully - its more of a "factual" article (house buying has dropped, builders are not bothered) rather than an "opinion". Most of TOI's articles are opinion and they have very carefully steered away from giving any in that article. If anything - the article is better for the builders than for buyers - because it flat out says that the builders will not drop their prices even though flat sales are down. Its like an open declaration by builders - on the front page of the leading national newspaper - that they are not going to come down with their prices. Well disguised and serves the builders purposes 100%.

    I for one think that the house prices will never come down unless the industry is more transparent - there is way to much "dirty" money in the business for the prices to correct.
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  • agree on most of the post of sales dropping. Most ppl. who have got flats now say that flats prices will never will be lesser than 1-1.5cr for a 2bhk and those who have not got one have missed the bus.

    Hope prices come to some sane levels for genuine seekers and govt. takes steps to curtails prices.
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