The Mumbai real estate boom ended in early 2023, as I mentioned in my column back in February of that year. Since then, sales have remained steady, averaging about 10,000 registrations per month, with around 25 percent being redevelopment units. Hopes were high during the festive season of October to December 2023, but unfortunately, they didn’t materialize. Why?
There are a few factors at play here. The pent-up demand for homes was met between August 2020 and December 2022, followed by a fivefold increase in the number of property launches in many areas. Selling under-construction projects in a market like Mumbai, where trust is lacking, has always been tough. But now, with stiff competition and inflated prices, individual builders are struggling to sell as many units per project. This is a big deal because most builders rely on customer advances to fund a significant portion (around 40-50 percent) of their project costs.
So, what’s next?
- Big-name developers likely to do better: Surprisingly, the average Mumbai homebuyer doesn’t have high expectations. They want a lot but know that getting anything more than a smooth home delivery is often wishful thinking. Established developers offer them hope that all their dreams will come true, on time. So, in underserved areas, projects by big brands will do well even if they’re priced high. For example, Godrej’s project in Raj Kapoor’s bungalow area in peaceful Chembur or Rustomjee’s sea-facing project in Bandstand (Bandra).
In competitive areas, branded developers will have to offer attractive prices to make sales. Meanwhile, developers with no proven track record will struggle to sell even at lower prices.
- Luxury market to take a hit: The term “luxury” is thrown around a lot in real estate, and now it’s more overused than ever. But even if we define luxury as projects with prices of at least Rs 8 crore (or around a million dollars), there are too many options from too many first-timers catering to too few buyers.
Moreover, luxury isn’t just about the price tag; it’s about a combination of factors like home size, design, amenities, and more. Many projects are labeled as luxury when they’re not. Vivek Bathija, a property consultant, says that over 50 percent of projects are pseudo-luxury and need to slash prices by 20 percent to attract buyers.
- Rise of payment plans: We’re seeing the start of payment plans becoming popular. It’s common to find schemes where you pay 20 or 30 percent upfront and the rest on possession. These plans limit the buyer’s risk if the project stalls. Builders who don’t offer the right prices or payment plans are struggling, and this trend will continue as more projects are launched.
- Slowing down of project acquisitions: Builders have been aggressive in acquiring projects lately, especially in redevelopment areas. Many smaller players see this as their chance to grow. But as the market cools down, we’ll likely see fewer acquisitions, although land prices may not drop.
- Stable overall sales: More supply leads to more demand, so home sales at an overall level will likely remain steady. However, sales per individual project may decrease as demand spreads out across more options.
As for a price correction, many builders may deny it at first, but eventually, they’ll have to face reality.
(Source: Moneycontrol)
Also read: The Influence of Education on Real Estate Market Trends