The prices of residential property in Mumbai have increased by 12 percent in India. In step with Mr. Samantak Das, national head (research) of Knight Frank, intrinsic factors drives the costs of property in every town. Base costs in tier-2 cities like Bhopal and Guwahati are reasonable compared to huge cities like Mumbai, that are reeling beneath value pressure. The value distinction in return reflects on flat sales across varied cities across the country.
While the realty markets in some countries are still doing well, globally the image doesn’t look therefore rosy. International property costs have seen their weakest annual performance since the depths of the recession in 2009, recording solely 0.9% growth within the year ending March 2012. Doubts over the Eurozone’s future, alongside Asian governments’ efforts to cool down their markets and deter speculative investment, have taken their toll and house costs were static within the first three months of 2012. Except the Eurozone malaise, the weakening sentiment is due to lower GDP forecasts and a priority that the world economic recovery could struggle to gain any real traction. The uncertainty surrounding the sovereign debt crisis in Europe and therefore the political paralysis in Greece are influencing trade conclusion and client confidence worldwide.
There are few signs to spice up the boldness of European house owners. Unemployment is rising due to cuts in public spending, inflicting wages and disposable incomes to be lessened, thereby weakening residential housing demand.
Residex index: City logs 9 percent growth Mumbai logged a growth of 8.6% whereas Kolkata had a slum, with a negative return. The same trend was conjointly mirrored within the National Housing Bank’s Residex index. The index for Chennai rose by 39.5% within the last quarter (January to March 2012) of 2011-12 compared to constant duration last year.
The real estate sector is perhaps set to repeat its 2008 story of high costs and few consumers. Property consultants believe the market is volatile once more, touching the heights of 2008, because developers are showing no signs of lowering the costs despite poor sales of the residential units. A recent Crisil report says sales of latest homes declined forty percent between March 2011 to February 2012.
An analysis done by property analyst, shows average property costs are 15% higher in Mumbai and 30% higher within the Mumbai Metropolitan Region over their previous peak in June 2008. Whereas the average value of the property in Mumbai rose from Rs 14,553 per sq ft in June 2008 to Rs 16,686 per sq ft in December 2011 within the MMR it jumped from Rs 8,124 per sq ft to Rs 10,559 per sq ft.
The rise resulted in an exceedingly more increase in unsold residential units. The non selling number of residences in Mumbai has gone up in December 2011 after the recession of 2008. Going by the quantum , it'll take roughly forty four to fifty eight months to clear the unsold stock in MMR. One is witnessing a situation almost like 2008, when developers refused to heed the worldwide economic recession and high interest rates to scale back costs. Now, whereas developers once again don't need to acknowledge they're financially overstretched, affordability may be a major concern due of high interest rates. Within the second half of year 2008, property costs dropped by nearly forty percent within the MMR. what's stopping developers from reducing costs to spice up sales.
A report on the property market by Kotak Institutional Equity analysts said that the RBI data pointed to many negatives - future weak launches, build-up of inventory, deterioration in absorption and additional moderation in housing loan uptake. If weakness in sales continued, deleveraging can stay a remote goal for property firms.
However, a number one developer and member of the Maharashtra Chamber of Housing Industry said that they haven't been ready to launch new residential property in Mumbai or complete existing ones owing to delay in getting it sanctioned. A sea change in development and funding prices, besides amendments to the DCR, can increase prices for builders and stop a discount in costs.