Rise in stocks of unsold units in Mumbai June 2012
As the pile-up of residential inventory continues unabated, as many as 80,000 units valued at Rs 1,050 billion are currently lying unsold in the Mumbai Metropolitan Region (MMR).
A report released by Knight Frank on Thursday said 45,000 units were absorbed in MMR between April 2011 and March 2012. This is way below the mark of 70,000-80,000 units sold annually otherwise. In 2011-12, absorption has dropped by over 60 per cent compared to 2007 when it was at its peak and 35 per cent as compared to the year before.
Of this unsold inventory worth 143 billion — i.e. 14 per cent of the total unsold stock — is held by the five listed players from Mumbai who together have a total debt of Rs 62 billion. The report states that prices dipped following the global economic crisis of 2008 and rebounded over the next two years scaling unaffordable levels causing absorption levels to plummet heavily.
The mounting inventory, however, has failed to exert a downward pressure on prices due to severe choking of supply over the last year and a half. “This steep drop in absorption levels should have resulted in a similar correction in prices. However, a regulator imposed supply crunch through delay in approvals ensured that market equilibrium was maintained. Thus, an even greater fall in units launched effectively offset the impact on prices,” said the report. The report points out that supply was also constrained by developers who have been holding on to their rates by deliberately refraining from launching new projects in order to cash in on their existing ones. In 2011-12, only 55,000 units were launched which is 40 per cent less than the 92,000 units launched the year before.
The highest number of unsold houses are those at the two ends of the price spectrum. According to Knight Frank, the highest vacancy has been witnessed in the ultra-premium markets of South and Central Mumbai followed by the far flung areas of Navi Mumbai, Thane and peripheral western suburbs. While the meteoric rates in the luxury segment has led to its downfall, the sudden spurt of new launches in the peripheral areas has resulted in higher vacancy rates there. “Developers are looking to tap in to the largest chunk of buyers looking for apartments priced up to Rs 7.5 million. Thus, an estimated 55 per cent of units under construction presently belong to this price bracket,” said the report.
Prices have already corrected a bit, in western suburbs (10-15% range) and Navi Mumbai (10-15% range again) , also lot of black money is parked in this sector so it would be unrealistic to assume that prices would correct more than 20%.
So if you are looking to buy, bargain well and you might get a 15% discount of the current psf rates in localities. The main thing to keep in mind is that whenever correction comes in the localities that would be in outskirts would be hit harder as compared to localities that are closer to the main city.
Personally I feel Navi Mumbai prices are more hyped and might see greater correction as compared to Thane/Western Suburbs/Central Line.
If one looks at correction then it is seen more in the areas where property prices zoomed up significantly earlier like Mulund, Bhandup. There is absolutely no correction seen in places where there was no sudden upswing like Dombivli, Kalyan.
The artificial hikes created have now come back in the form of correction.
In Mumbai an island, the prices will never correct significantly as there will always be a shortage of space. Hence we find redevelopment of old buildings being taken up nowadays.