Demand-supply mismatch in Mumbai Metropolitan Region (MMR)'s residential market has led to a pile-up of 2.13 lakh unsold housing units, a Knight Frank report said. So much so, that it will take at least three years to dispose of these units, the report said.
However, there are slim chances of prices coming down, Dr Samantak Das, Chief Economist & Director, Research, Knight Frank India, told dna.
Knight Frank is a global real-estate brokerage firm that conducts surveys and releases analytical reports on a quarterly basis. The current report is for the residential and office market in MMR from January to June 2014.
That's strange. Why are prices not coming down?
"Mumbai real-estate market does not work on demand and supply. There is huge holding capacity here. So city-based developers will not reduce prices. If this unsold inventory was in any other city, there would have been a 10-15% price correction," Das said.
In which areas are this pile-up happening?
Mostly in extended suburbs like Vasai, Virar, Kalyan, Dombivli and Navi Mumbai.
According to the report, demand within MMR dropped by 25% in the first half of 2014, compared to the same period last year.
Why are houses remaining unsold?
Buyers were sitting on the fence for most part of 2014, hoping that a new and stable leadership at the Centre would revive the country's ailing economy. As a result, unsold inventory increased. Over the last 2-3 years, India's economy also deteriorated and it reflected on the MMR residential property market. As a result, 2014 witnessed a decline of 15% in new launches at 92,845 housing units.
Does everyone agree on piling inventory?
Arvind Goel, president of Maharashtra Chamber of Housing Industry, said sales are quite slow in under-constructions projects. "But in the ready-possession market, buyers are not getting flats. Poor sales in the under-construction category may be behind the rising unsold inventory. Shailesh Puranik, managing director at Puranik
Developers, said the report of Knight Frank is not authentic.
What about office market?
As far as the office market is concerned, government initiatives for improving business sentiments, along with certain impetus for the real-estate sector like Foreign Direct Investment and Real Estate Investment Trusts are good boosters. "This is expected to revive the absorption in office space and residential market over the next six months" Das said.