Flat prices climb down 10-15%

Sky-high prices bring down demand, lead to gradual correction

MUMBAI: Is it going to be the summer of content for real estate buyers in the city? Prices are already down by 10-15% and there are reports that rates will go down by as much as 30% in the next few months.

With several brokers recording nil transactions in the past three months, flat prices have already started the downward spiral. The impact is being felt more in areas where many projects are underway, like Mahavir Nagar and Thakur Complex in Kandivli.

“I have not sold a single flat since November,” says a property dealer from Andheri’s Lokhandwala Complex, RA Kamat, adding that most deals have been leave-and-licence ones.

Kamat says the astronomical prices quoted by developers and those trying to dispose of property has made real estate out of reach. Coupled with this are the rising fuel prices, high interest rates, and the US sub-prime crisis.

Other brokers agree, saying most middle-class buyers have deferred flat purchases because of the unrealistic rates being quoted. At Vasai, for instance, flats are being quoted at Rs3,000 per square foot (psf) as against Rs1,500 two years ago. At Borivli,rates have hit Rs7,500 psf and sellers in Vashi are demanding Rs7,000 psf. Earlier, property here was going for Rs3,000.

At Tardeo, flats that once cost Rs8,000 psf are now being quoted at Rs15,000. At Dahisar, the rates are between Rs3,000 and Rs6,000 psf. At Lokhandwala Complex in Kandivli, the rate is around Rs6,500 psf.

“Prices have dropped 10%,” said Rajesh Mehta of Raha Realtors, Santa Cruz. “There are no transactions taking place between Bandra and Santa Cruz. People are in wait-and-watch mode till the Union and state budgets,” he added.

Mehta said the state government’s likely decisions to increase FSI and tax incentives are expected to increase the supply of flats in the market. If that happens, he said, prices could drop by at least 30%.

According to Mahesh S, a broker from Sion, owners of resale flats are unwilling to reduce their high prices in the Wadala-Matunga-Sion triangle. “As a result there are no sales,” he said. “The owners are quoting rates equivalent to those of new developments.”

Jakhubhai Gogri, a broker from Dahisar, said citizens are deferring purchases as they are not getting flats of their choice despite being willing to shell out high rates. Said Gogri, “Lots of flats are empty though developers are claiming to have sold them all. The market has stagnated.”

According to Yashwant Dalal, president, Real Estate Agents Association of India, the scenario is similar in South Mumbai. “Out of 100 prospective buyers, we have just five purchasing flats costing anything between Rs20,000 and Rs70,000 psf,” he said.

“Redevelopment schemes are also not picking up. Developers are giving discounts of 10-12 per cent if you make full payment. They are throwing in a modular kitchen and another amenities.”

Admitting that sales have come down, Mukesh Patel of Neelkanth Developers said high interest rates and property prices have increased the gap between demand and supply. But he believes prices will consolidate this year. “There is no land available for mass housing,” he said. “And 50 per cent projects are stuck for want of numerous permissions like environment.”