Being the financial capital of India, professionals, job seekers migrants from all over the country flock to Mumbai to make their careers and realise their dreams giving rise to the sobriquet of ‘City of dreams’.
While buying a house in the island of Mumbai was and remains a proposition not for all, however people working in the city always had an option to buy their houses in suburbs and satellite towns of Mumbai where residences were affordable. These peripheries are now fuelling resurgence of the real estate sector in Mumbai.
Peripheral areas of Mumbai gaining increased preference
A recent ANAROCK study shows that there is a marked preference by new home buyers towards buying housing properties in peripheral areas of major cities in the country. This study which covers seven major cities in the country shows that around 58% of all new projects launched in these cities in FY20 are in their peripheral areas. This trend is on the rise as in FY19, this proportion was 50%.
Similarly in Mumbai MMR too, of a total of 34,620 housing units launched, a significant chunk amounting to 67% was in peripheral areas of the city. This is up from 60% in FY19. Key and fast-growing areas with increasing demand which constitute as peripheral areas of Mumbai in today’s time are Dombivali, Panvel, Palghar, Vasai, Virar, Kalyan, Badlapur and Bhiwandi.
With work from home being a reality, home buyers are preferring satellite towns of Mumbai for their fulfilling their demand of buying affordable and larger homes. Both the companies and their employees were pleasantly surprised by the success of Work-from-Home experiment and it has paved way for a hybrid model of work, wherein one does not have to go to office every day. Thus consumers are looking to buy bigger houses in the suburbs. Another evolving trend is that of satellite offices, wherein increasingly corporations are setting up offices in the suburbs that are residential hubs. Typically, located in an integrated township project, these offer employees the convenience of walk to work.
The supply too has followed the demand with Grade A developers like Lodha, Godrej and Hiranandani among others have come up with self-sustained and integrated townships in the peripheral areas of Mumbai. Consumers are opting to buy their property in self-contained townships as they are self-sustainable and developed to meet the primary requirements of their residents, provide amenities for leisure and have ample open spaces. In addition, the buyers have shown a marked preference for properties developed by grade-A developers and in the process willing to pay a premium over the market price as they are assured of quality and delivery.
The looming spectre of real estate price rise
While demand supply economics will dictate pricing dynamics, there are clear signs of real estate prices rising soon. The major factor influencing this upward trend in real estate is inflation which has a twin effect on the housing sector affecting both the demand and supply side. First effect is that rising inflation is going to play spoil sport with the prevailing interest rates. While the Government is trying hard to not raise the interest rates given the pandemic conditions, soon the time will come when economic compulsions will force it to take unpopular decisions to boost the country’s economy in the long term. So, home buyers will have to pay higher EMIs as they delay their buying decisions.
On the supply front, inflation has taken its toll on the input costs as prices of commodities like iron, cement and steel have gone up by 10-15% in the past year. The developers are already under stress having cut their costs last year during first wave of Covid-19 to hold prices to attract home buyers. So, there is limited scope for developers to absorb the increase in prices for their raw materials. Soon they will have no option but to pass on the increased costs either in part or in full to the home buyer.
With prices set to rise, the sooner the home buyer finalises his purchase decision the cheaper it is going to be eventually.