Anuj Puri, Chairman, Anarock Property Consultants
17,000 ready-to-occupy homes for sale in Mumbai; 1.50 lakh to be delivered in next 3 years
Real estate is close to the heart of most Indians who at some point want to buy or sell a property. The reasons could be emotional and investment-driven, and often both. And, of course, nothing defines Indian real estate quite like Mumbai does.
Call it by any name you want to - India’s financial capital, Maximum City, or the city of dreams and opportunity. One thing is sure - it is India’s most expensive housing market. Property prices here had increased by as much as 7-10 times over the past 20 years.
Today, the average number of monthly incomes required to own a home in the city is the highest among its other counterparts. Depending on where in Mumbai you want to buy a home, you are putting anything between 67-90 times your entire monthly income on the line.
Growth Constraints
While Indian real estate is rarely out of the news, probably no city's real estate market gets as much media attention as Mumbai's. That’s not surprising, considering that merely 5% of the people living in the city today can actually afford to buy a home here, either outright or with a home loan.
The Problems with Going Vertical
While building super-tall skyscrapers is one way around this limitation, how many can one build before the whole system breaks down? A fully-occupied 40-storeyed skyscraper with 1600 apartments roughly consumes 6.5 lakh liters of water and 4,800 kilowatts of electricity per day. Each new apartment must now by law have a car parking space, and the building itself must have a minimum saturation of amenities that make life worth living in it.
The Bane and Boon of Speculators
The major factor responsible for sky-rocketing prices in Mumbai were the speculators - investors who bought homes with the sole objective of selling them in the short-term but earning the fattest-possible profit. Speculators made Mumbai their Mecca because of the impossibly high property prices, and they drove the prices even higher.
Many are tempted to believe that it is the developers who are responsible, but they are responsible only to the extent that they avidly courted speculators, because they could sell many flats off to them in bulk.
By the time everyone realized the long-term implications of speculative activities, the damage was done. Today, Mumbai is right up there with Tokyo, New York and London as a city where everybody wants to live and very few can afford to, except perhaps in the most constrained conditions.
Price Correction
One of the major developments seen in Mumbai real estate in recent times was the slight price correction - meaning that Mumbai's notoriously unrelenting and ever-increasing property prices first stopped growing and then began falling. Over the last 3-4 years, prices in the city have dropped anywhere between 3-5% across several areas.
The Impact of MahaRERA
Though RERA is still in progress, it is becoming increasingly clear that unethical and deceptive business practices – not only by developers but also brokers and, in fact, any agency that promotes real estate – will no longer be tolerated. We are now looking at a future where everything must and will be on record, all promises must be fulfilled and heavy penalties – including imprisonment – await those who don’t toe the line.
The biggest impact of RERA and other key policy changes has been on property sales - and while there was doubtlessly a dampening effect on the real estate industry, it is good news for end-users of real estate - even in Mumbai. Within the turmoil that came in the wake of the various real estate-specific policy upheavals, the customer has finally become king. When sales plummeted to all-time lows, property sellers actually had to think about their customers’ interests for a change.
What the Data Reveals
- There are about 17,000 ready-to-occupy homes up for sale in Mumbai, and 1.50 lakh more homes under construction which will assuredly be completed thanks to the stringentMahaRERA.
- If we assume a standard flat size of around 900 sq.ft. of carpet area, the overall unsold inventory in the city right now accounts for around 2,300 full-sized football fields or 7,700 cricket stadiums.
Developers here have to pay hefty taxes on unsold inventory, and that most of them are so cash-strapped that they cannot launch any new projects until they have sold what they already have on hand.
To sell this inventory, they have literally pulled out all the stops. We have already seen property prices in Mumbai drop by 3-4% in the last 2-3 years. However, a serious buyer with cheque book in hand and ready to make a down-payment can, in many cases, expect another 10-15% discount - along with waived stamp duty and registration, and no service tax if the flat is ready for possession.
Such a scenario would have been unimaginable in Mumbai 5-6 years ago.
Infrastructure
The latest Mumbai Development Plan 2034 has opened up areas which were previously barred from development, like the CRZ and salt-pan lands. Good in one way – there will be massive infusion of affordable housing. Not so good in other ways – it is bad news for the city’s environment, and it will put a massive strain on its current infrastructure.
However, we are also seeing a steady thinning-out of the urban population in Mumbai's central locations, with more and more people migrating to the new-emerging areas. The trend of outward migration from the MMR will continue over the next couple of decades, not only because of the astronomic property prices and crumbling infrastructure, but also because these new regions are becoming the new employment hubs.
Environmental Change
Mumbai was originally reclaimed from the sea by joining seven islands to create a shipping and trading hub for the British. We must definitely take climate change and infrastructure to counter it very seriously, because the city's sea level is rising by about 1.2 mm every year. NASA has confirmed that over the next 100 years, glacial melt may increase Mumbai's sea levels by around 16 cm. It has been estimated that the Indian subcontinent could lose 14,000 sq. km of land if the sea level rises by one meter.
For this reason, Mumbai is at high risk from climate change. The time to start bulwarking against it with adequate infrastructure is now.