If state property registration department figures are any indication, Mumbai's real-estate market is in dire straits and it could collapse anytime. In October 2014, the government could earn only Rs 15.19 crore from 16,700 properties that were registered.
In fact, figures suggest that the market has been consistently sliding since January 2014.
Why even October saw low sales?
October normally sees good business, overall, as Diwali and Dusshera fall this month. However, there were only 16,700 property registrations in Greater Mumbai and the government could earn only Rs 15.19 crore. Pankaj Kapoor, MD at Liases Foras, a real-estate research firm, told dna that the property market is beyond the reach of the common man now.
What are the reasons for the lull?
Kapoor says big deals are not happening. Only small transactions – one BHK and one room kitchen – are taking place. Even here, lease, leave and licence transactions form a major chunk.
Is inventory piling up?
Yes."The cost of an average flat is more than Rs 2 crore. No one can afford to buy them. Inventory is piling up each year. In fact, 54,000 newly built houses are lying unsold in Mumbai. It will take almost five years to dispose of this inventory," says Kapoor.
Who is to be blamed?
The government is equally responsible as the developers, he says. The government has increased ready reckoner (RR) rates to earn more. Now, RR rates are the benchmark at many places. Developers cannot sell below the RR rate. For example, in Lower Parel, the RR rate is Rs 4,000 per sq ft. But if you take into account construction, land and labour costs and government premium and interest rates, no developer will be able to sell below Rs 35,000 per sq ft.
Where's the market headed?
According to Kapoor, the market is economically unproductive and inefficient. "Developers are also in a catch-22 situation. Earlier, they increased rates for better profits. Now sales are not happening and inventory is piling up. If the situation does not change, the market will collapse sooner than later," he said.
What are developers saying?
Paras Gundecha, chairman of Gundecha Developers, admits sales are poor. "What we can do? The state has to do something to increase sales. They should curtail high taxes on the construction industry. Besides, there should be time-bound approval procedure," he says.
What is their suggestion?
Gundecha says if residential projects get commencement certificates within three months from the date of submission, property rates will come down by 15-20%. "Delay in approvals leads to rise in project costs and we have to pay high interest on loans. We strongly hope the BJP government in the state and at the centre will do something," says Gundecha.
Is there a permanent solution?
Praja Foundation, an NGO, recently published a report on Mumbai's housing market. It said 80% Mumbaikars cannot afford to buy a house and this accounts for rising slums. The NGO said if the government wants to solve the housing issue, it should immediately commence the Trans-harbour link that will open huge tracts of land in the eastern and western suburbs. Panvel, Ulwe, Gorai and Manori are three examples.
Will Harbour link help?
"If it happens, property market rates will automatically come down. Chief Minister Devendra Fadnavis approved infrastructure projects worth Rs 54,000 crore on Thursday but he did not talk about the Harbour link. "Increasing floor space index and changing development control rules would be superfluous solutions," Kapoor points out.
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