It seems prices has started falling in Mumbai, many builders have started quoting less than what is being advertised, also many flats owners have reduced their prices to sell their flats as soon as possible before the price drops more, any first hand input welcome...:D
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  • No demand for houses, but prices hit an all-time high

    The laws of demand and supply do not apply to your city's real estate scenario. With 93,000 under-construction and readyfor-possession homes still unsold, the 'weighted average' cost of a flat is at its peak, according to a finding put out by property research firm Liases Foras.

    On an average, the cost of a flat in Greater Mumbai (area under BMC limits) is pegged at Rs 2.18 crore. That's a 436 per cent rise compared to 2005 prices. Since then, the graph has steadily moved northward but for a brief dip during the economic meltdown in 2008 (see info graphic).

    Common man's woe

    And this upward swing in cost has pushed the middle class to the fringes. A basic principle of lending institutions says that the cost of your house cannot exceed five times your annual salary. In 2005, to buy a home, your annual income should have been Rs 8 lakh. At today's prices, your annual income has to be Rs 43 lakh.

    "Five years back, Rs 8 lakh per annum had a higher purchasing power than today. And it was not too difficult for one's family income to be in the range of Rs 5-10 lakh," said a market observer. "Today, even if individual incomes fall in that range, very few family incomes are in the Rs 40-lakh range," he said.

    Managing Director of Liases Foras, Pankaj Kapoor, points out at a pricesale pattern, not particularly to Greater Mumbai but in the entire Mumbai Metropolitan Region that includes Greater Mumbai, Thane city and Navi Mumbai.
    "When prices fell, sales picked up. Like, when the per-sq-foot weighted average price in the metro region fell from Rs 8,100 in 2008 to Rs 5,300 in 2009, sales improved from 9 million sq feet to 20 million sq feet," said Kapoor.

    The rate today is Rs 9,235 per sq ft. Even if you factor in inflationary costs, prices will have to be in the range of Rs 6,000 per sq ft to increase market efficiency."

    Prices likely to drop?

    With home sales already low, and if the current pace of sales continues, it will take 35 months for the current stock of unsold homes to find buyers, feel realty experts. And, they opine that this situation will only bring down the market further.

    "While an overall correction of 35 per cent is required to improve sales, South and Central Mumbai will need a correction to the tune of 40 per cent," said Kapoor.

    Though not all realty experts may agree on that, the general sense is that prices will correct by at least 15 per cent in the next six months.

    Source

    No demand for houses, but prices hit an all-time high - The Economic Times
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  • BUilders seem to be under stress. Saw an full page ad in TOI for HDIL metropolis.
    It was sold out as per the IPO prrospectus and also builders website but seems to have got unsold. Any idea what are the prices now and how they compare to the prices 1-2 yrs back
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  • Originally Posted by ankilsanghvi
    Private lenders make most of realty cash crunch, earn hefty interest - The Economic Times........worth reading this article from economic times



    if builders/developers cant service a debt of 11.5%, how are they ever going to service a debt of 24%? where are the cashflows?
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  • Builders are waiting for mango people to blink

    Originally Posted by rembrants
    if builders/developers cant service a debt of 11.5%, how are they ever going to service a debt of 24%? where are the cashflows?


    Builders are waiting for mango people to blink-- but in this case even if he/she wants to buy a 2 bedroom flat , banks are not going to let him buy
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  • Waiting Game -

    Only thing I can think, is that may builders may have very good loan to value ratio. SO PE is investing. A project's market value is say approximately (fair avlue of all apartments) is 100 crore. Construction costs are say 25 crore.

    Builders borrow 25 crores at 30% and return loan+interest in 3 years. Say they return 50 crores. I think there is still margin - for money to be made.

    Now builders are affriad to give discount to buyers and get advance cash. As once discounts given the earlier buyers/investors will have a disadvantage. The early buyers are generally investors - who were premised hefty returns. Builers don't want to disappoint them. In this game, reputation and trust is everything. Once early investors looses trust - you are an ordinary builder. That's why I think builders will prefer to borrow at 30% than reduce prices. They will try to wait out as long as possible.

    It is more like waiting for Train on Ghatkopar railway station. More you wait more you are hopeful that train will arrive. If buyers wait more - they can win. If builders can wait more - builders will win.

    Once the builders increases booking price, the investors/future residents they have bought apartment will brag about their sound decision. Builders think that increase in prices will show builder has heavy demand - and builders expect that new buyers will jump in. Increase in price is expected to be used as tool to increase sales.

    Waiting game is on.

    Previously it was expected to be over once banks stopped funding on RBI norms. Now private equity is providing funding who are in turn financed by US cheap credits. Builders have more time to wait out.

    Waiting game is on.
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  • Originally Posted by amitshah
    Only thing I can think, is that may builders may have very good loan to value ratio. SO PE is investing. A project's market value is say approximately (fair avlue of all apartments) is 100 crore. Construction costs are say 25 crore.

    Previously it was expected to be over once banks stopped funding on RBI norms. Now private equity is providing funding who are in turn financed by US cheap credits. Builders have more time to wait out.

    Waiting game is on.


    Very interesting post Amit. I feel the same.
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  • Amit, at the margins you are taking about most ppl are prized out currently, so even if they want they cannot buy, the prices needs to come down or the flats will stay empty.
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  • I think HDIL Metropolis has gone from 27 floors to 31 floors and that is what they are selling now ( 50 flats ) rate launched was 7651 + 35 floor rise and now its 12500 + 75 floor rise. There is no work going on there for last 1 month. building looks deserted.
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  • The one who has more patience will win.But at these prices buyers are forced to not buy the flats, even if they are impatient. Though a builder increases the prices for his reputation against investors, they secretly sell at lower prices than investors. I 've met some of those kinds. payin 25% interest will not be an easy task if sales continue at current pace.
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  • I, 25 days back had visited Runwal orchad project at Ghatkopar. The price I was told was 11500 + floor rise. Since past 2 days I 'm gettin calls from builder's office and are offering me at 10k all inclusive. Though its not much a lucrative project to jump in but the big runwal group seems desperate.
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  • How do projects gets priced in Mumbai?

    I have not seen builders in Mumbai disclose the UDS (Undivided land allocated to each flat). Obviously land is an important factor in valuing a flat.

    Use of TDRs have become common and some projects get way more FSI.

    More FSI = Higher Built-up area = Less % of land for each owner = Lower Value

    A building with 4 FSI should in theory get less than a buidling with 1.5 FSI.

    Do you guys take this into consideration when you buy?
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  • Another article on the cash flow / liquidity pressure on builders (not Mumbai specific).

    'India poised for $5 bn wave of PE exits from property' - Reuters -
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  • Originally Posted by ankilsanghvi
    I, 25 days back had visited Runwal orchad project at Ghatkopar. The price I was told was 11500 + floor rise. Since past 2 days I 'm gettin calls from builder's office and are offering me at 10k all inclusive. Though its not much a lucrative project to jump in but the big runwal group seems desperate.

    Initial discount of 15% then can expect overall 25%+ with negotiation. Although need to be vary of carpet area loading.

    I feel Mumbai RE will correct to pre-2008 levels.
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  • Originally Posted by hitmady
    Initial discount of 15% then can expect overall 25%+ with negotiation. Although need to be vary of carpet area loading.

    I feel Mumbai RE will correct to pre-2008 levels.



    well..builders will agree/ may agree/ secretly agree for discounts are vague statements. I have not seen any prices correct in any projects, or for that matter even in resale flats.

    Flats are getting resold in far fledged areas like Kandivali east, (building name: Challenger Heights) also for over 1 cr. I know of a definite deal. Do u know of a deal where u have seen actual price correction? If yes, then please quote it; If not then dont make statements based on "feelings"
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