Steel tycoon Sajjan Jindal might have bought a Rs 400 crore house and Housing Development Finance Corporation Ltd (HDFC) could have witnessed 20 per cent growth in home loan disbursements in the April-June quarter, but these do not indicate the real state of Mumbai's property market.Property prices
in the country's financial capital are on the wane and could drop by 35 per cent in 18 months, according to published sales data and experts, who added that there has been a sharp decline in registrations and it could deteriorate further.
In June 2011, Mumbai witnessed a 30 per cent drop in property sales agreement registrations as compared to the same month last year, according to a report by Nomura Financial Advisory and Securities (India) that has quoted Maharashtra state stamp and registration department's data.Read rate hike hits home loan offtake
The total property registrations in Mumbai from January to June 2011 was 20 per cent less than the property sales registrations of the corresponding period of 2010, according to the report. "These numbers may not reflect sales in that particular month since registrations for sales in new launches would be done with a lag of six-nine months. We believe that the reason for the slowdown in registrations, apart from high prices in Mumbai, is also the lack of approvals for new projects," said Nomura in the report.
"The current situation is worse. Whatever has been reflected in the data is six months old because registrations do happen late," said Pankaj Kapoor, managing director (MD), Liases Foras, a real estate rating and research firm.
"Prices are heading for correction and nobody can stop it as market forces would determine the real pricing. Several developers are on slippery ground and it is a matter of time before prices fall," he added.
Kapoor added that with the Mumbai market having unsold inventory of 104 million sq ft of real estate, prices
should drop by 30 to 35 per cent in the next 18 months because high prices are deterring end-user buyers from booking a house. "Developers are still holding on to their prices but are willing to cut prices for serious buyers," he said.
Mumbai's property prices, which have stabilised in recent months, had gone up by 15-20 per cent on an average in the January to June 2010 period. "Approvals for projects in Mumbai have not been easily forthcoming for the last six months and this could lead to a further fall in registration volumes.
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The slowdown in sales volumes may have intensified further due to higher interest rates, which could now pressure developers to bring down prices," said Nomura analyst Aatash Shah.
The report said that though the fall in registration volumes may not signal a very worrying situation, the demand slowdown may have intensified further in the interim period and this would pressurise developers to cut prices during the upcoming festive season starting October.
"We would not be worried by a price correction in the Mumbai property market as that could generate a positive sentiment among buyers even in the face of high mortgage rates. We expect volumes to move up once a price correction of 15 per cent sets in," Shah said. Land locked Mumbai is a different market from rest of India but there is a limit to a hike prices in the name of demand and scarcity.
Courtesy: Mail Today