Premium realty prices may drop 10-15%

While industry watchers have been predicting a price correction in the Mumbai real estate market for quite sometime, big developers are also seeing them softening in the next six to eight months.

The correction is likely to be 10% to 15% and most of it is expected to play out in the premium real estate space.

Realty demand in Mumbai is already sluggish for more than six months now. Based on number of sale documents registered with the property registrar, sales have declined 25% in August 2011 over the year-ago period to 4,611, which is lowest in the past 27 months.

Rajeev Piramal, executive vice-chairman, Peninsula Land, said, “I do not believe that the Mumbai property market is overpriced, but it could be very close to its full market value. Thus, one may not expect a significant property price appreciation to happen.” Piramal was speaking on the sidelines of a Ficci real estate summit.

Brotin Banerjee, managing director and CEO, Tata Housing, also sees prices correcting in the high-end segment.

“I expect a 10% to 15% price correction in the premium segment. No price correction is expected in the affordable segment,” he said.

On the timing of correction, Banerjee said, “Developers have pinned hopes on the forthcoming festive season. If demand remains lacklustre even during the festive season we can see a price correction happening in the near future.”

Milind Korde, managing director, Godrej Properties, shares a similar view.

“A price correction could be expected in the high-end segment, but seems less likely in the affordable segment. Instead, we could see prices rising in the affordable segment. The extent of correction depends on the kind demand we witness in the festive season.” Korde said the price correction would also be micro-market driven and depend on the completion stage of the project.

Some said this correction could happen in South Mumbai and places like Parel, though not much is expected in the suburban markets.

“I expect this price correction to happen mostly in the city-side areas such as Parel for two reasons — high funding requirements as they are high-end projects and there is certain amount of oversupply as well. A price correction is not expected in the suburbs as there isn’t much supply coming in these markets due to approval and other issues,” Niranjan Hiranandani, managing director, Hiranandani Group, said.

Officials from Orbit Corporation said prices are stable for ready-sale projects.

Pujit Agarwal, CEO and managing director, Orbit, said, “In the high-end segment, prices have been in the range of stable to going upwards in areas such as Bandra, Juhu and South Mumbai. These are prices for ready-property sale. For under-construction projects, depending on location and developer, there are certain stray deals happening at marginal discounts.”

However, Agarwal agrees property prices in Mumbai market have peaked out.

“It is around four to six quarters before we see a downward trend as supply constraints continue,” he said.  Industry watchers believe the correction has already begun in certain projects and micro-markets. Certain developers are also offering these corrected prices in the form of freebies such as free parking space, waiver of stamp duty and registration.