The real estate market doesn’t seem to pick its lost pieces and the ground still seems shaky. Knight Frank India has come out with a report on a comprehensive analysis of the residential and office market performance across eight cities for the period January – June 2019 (H1 2019) which shows that the housing units sold ( In Mumbai) saw an increase of 4% in H1 2019 to 33,731 from 32,412 in H1 2018. The report findings establish that the number of residential launches in Mumbai increased by 22% in H1 2019 to 43,822 from 35,874 in H1 2018.
What seems to be still a disturbing factor is that on account of launches being higher than the sales, the unsold inventory levels in MMR have inched up 14% YoY to 136,525 units during H1 2019. Also, the prices don’t look to have corrected as much as the buyers would have expected. The weighted average price for MMR was down 3% YoY during H1 2019. The prices have corrected by 12% from the peak of H2 2016.
Some residential market highlights of the Mumbai city:
- The launches growth tapers to 22% year-on-year (YoY) during H1 2019, after registering a stellar 220% YoY growth in 2018.
- 62% of the launches during H1 2019 were in the sub-Rs 75 lakh ticket size and 82% were below Rs 1 crore ticket size.
- Thane market witnessed the largest quantum of new launches on account of new projects
- During H1 2019, sales in MMR grew marginally by 4% YoY to 33,371 units
- Sales in H1 2019 were affected by two major events- GST ambiguity and election uncertainty.
- Affordable houses continued to drive sales in H1 2019, relatively affordable markets of MMR – Thane, Peripheral
- Central Suburbs and Peripheral Western Suburbs combined, grew by 6% YoY during H1 2019. However, sales in the pricier BMC markets grew only by 3% YoY in the same period.
With RERA in place, the trust between the builders and the buyers still need to grow. Banks are yet to transmit the benefit of repo rate cut to the home loan takers as the transmission has been marginal till now. Of the 75 basis points repo rate cut by RBI, the banks would have passed on 10-30 basis points to the home loan takers. In addition, the GST still continues to play the spoilsport as most developers have opted for earlier GST regime for 12% with ITC for on-going projects. With NBFC crisis still on, the liquidity crunch will increase their cost of funds and thus impact buyer interest.
Builders and real estate developers on their part are offering freebies, discounts and deals to the new buyers in the form of ‘No floor rise, no stamp duty, 2 years maintenance free period, no clubhouse charges, 2 years assured rentals schemes, various subvention schemes, deferred payment plans’, etc. Also, earlier subvention schemes and deferred payment plans were available only in under-construction projects, but now it is available in few OC ready projects as well.
Until Rera projects start delivering in the promised time frame and the home loan interest falls below 7 per cent in the current scenario, the buyer interest in the market will take its time.