Prices begin declining in suburbs; upmarket deals frozen. |
After the steep correction in stock markets in the last two weeks, property prices in Mumbai suburbs are headed southwards. |
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While prices have started to climb down in the suburbs, transactions at the upper end of the market, in south Mumbai areas, have stalled as buyers wait for prices to cool. Land prices too are on a downward trend, especially in the overheated Navi Mumbai areas. |
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In areas like Worli, Cuffe Parade and Colaba, brokers report that there have been few transactions since the stock market crashed. |
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In the mid-market segment, from Belapur in Navi Mumbai to Kandivili and Borivili in the western suburbs and Thane, Mulund and Vikhroli in the central suburbs, buyers have reported softening of prices for residential properties. |
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Several prospective buyers have had builders or property agents, who were originally reluctant to cut prices, call back with significantly lower offers. |
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Industry watchers in the city have been saying for a while that the valuations are inflated in some areas and are due for a correction. The areas where a correction was predicted included the suburbs of Borivali, Kandivali, Thane, Mulund and Belapur and Panvel in Navi Mumbai. |
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At the height of the real estate boom in the city, prices of prime property in the suburbs had touched Rs 60 lakh. South Mumbai saw the Bombay Dyeing scion Jeh Wadia's flat going for an unheard of Rs 35 crore. |
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Said Rajesh Prajapati, president of the Navi Mumbai Builders' Association, "Prices had shot up beyond the reach of buyers in many areas. Those areas are now seeing a correction. Also, builders who need liquidity in the short term as their stock has piled up are off-loading some of it. I see this trend continuing till Diwali, Diwali, after which there should be an upswing" |
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He also pointed out that in areas like Kharghar where land prices had heated up, there was some correction as land had been over-sold. |
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On the other hand, Arun Goel, CEO, DHFL realty venture fund, is sure that the trend will continue for some time. |
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"All indications suggest that it is time that prices climbed down and that is what we are witnessing. The market has been on an upward trend since 2002 and we saw a rapid rise, not typical of this asset class, in the last two years. It escalated much more than was expected or was healthy. The writing has been there on the wall for sometime now, with the RBI also tightening liquidity. Also, no serious player wants this kind of a prolonged boom as the fall, when it comes, will be that much sharper." |
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With market sentiments ranging low in the last couple of weeks, city brokers admit that few property transactions are being recorded in the city. |
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They admit that there is tremendous resistance to the current prices and most buyers are waiting for the prices to cool and the only way builders can off-load built-up property is to offer discounts. |
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Prices in the city had heated up as many buyers in the last couple of years were using their stock market earnings to buy real estate. This, combined with a low interest rate regime, saw a huge buying interest and prices spurted by over 20 per cent in these suburbs. |
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But as interest rates are hardening and returns from the stock markets are diminishing, liquidity is also drying up and the price resistance is more pronounced now, analysts said. |
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Industry insiders also say that builders who were sitting on built-up properties were keen to sell off before the impending correction. "This is the reason they are calling prospective clients and offering the same properties at 10-15 per cent discounts," said an analyst. |
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Another reason for the phenomenon is that the difference in prices of older buildings and new constructions has shot up significantly, making buyers prefer 5-6 year old buildings which are cheaper by 15-20 per cent. |
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"If you are buying a property for Rs 60 lakh and have to put in 15 per cent of the money, you will obviously go for a 5-year-old property that is going for Rs 51 lakh," said Sunil Jain, a Bandra-based broker. |
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