In the last decade, property prices had shot up beyond the buying capacity of customers, he says. "But there was no matching rise in salaries. There is a huge difference between affordability and reality. It has dampened sales," Kapoor explains.
There's a saying in the stock market: Never catch a falling knife. In the real-estate market though, that's what everyone would love to catch. And it's happening.
The average cost of a flat in Mumbai is down. What's more, real-estate research firm Liases Foras says it will only slide further. If in 2014, the average cost of a 2BHK apartment was Rs 3 crore, it is Rs 2.91 crore in 2015, says the firm. In the Mumbai Metropolitan Region, the corresponding figures are Rs 1.32 crore and Rs 1.31 crore, respectively.
"There is no significant sales and most registrations are for leave and licence and lease agreements," Pankaj Kapoor, managing director, Liases Foras, told dna.
In the last decade, property prices had shot up beyond the buying capacity of customers, he says. "But there was no matching rise in salaries. There is a huge difference between affordability and reality. It has dampened sales," Kapoor explains.
Pranay Vakil, founder and former co-chairman of global property research and brokarage firm Knight Frank, agrees. Over-supply and high prices are sobering property rates, he said.
Builders admit they are feeling the pinch. "We are facing huge problems in disposing piled-up inventory," says Anand Sherawat, a developer from Navi Mumbai. So, if it pays to wait, how long? How much does affordable mean? While experts say the lull will remain for two more years, Vakil has an interesting explanation of what affordability means.
"The total flat cost should be equivalent to the total five-year income of a husband and wife. If it's more than that, buyers will be reluctant. That's the scenario we are facing today," says Vakil.
Manohar Shroff, secretary, Maharashtra Chamber of Housing Industry , Navi Mumbai unit, blames high land prices. "In Navi Mumbai, Cidco and local land owners are selling property at such high rates that developers have to jack up rates," he says.
"We hope the government will reduce taxes and banks will cut down interest rates. If that happens, customers will again start buying," says Sherawat.
If you think builders won't give up that easily and are suggesting tax and interest rate cuts to keep property prices intact, listen to what Kapoor says. "To increase sales, developers have no choice than to cut prices. In most under-construction projects, they are keeping low or tempting prices."
Whoever said a fall is not tempting!
Year-to-year, prices have come down almost by 0.95% and 3.23% in MMR region and Mumbai, respectively. The quarter-to-quarter fall is 0.99% in MMR and 1.51% in Mumbai. The average flat rate per sq ft has also decreased. In 2014, it was Rs 13,020 per sq ft in MMR. It is Rs 12,896 in now. In Mumbai, it has plummeted from 20,125 per sq ft in 2014 to Rs 19,681 in 2015.
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