The increase has been 42% in past 6 months; recent sales way below peak recorded last year but city developers in no mood to relent
With skyrocketing realty prices, sales of residential flats in Mumbai have dropped since July last. According to data released by PE Analytics and Edelweiss Research, volume of residential sales for the three months ending October is way below its peak of 6,600 units recorded in May 2009.
The festival season did not bring any cheer to developers as they were in no mood to reduce prices. According to the released data, as of October, the average sales volume of three month stood at 3,800 units compared to 5,100 units in the same period a year ago.
“However, Mumbai has been the exception with volumes declining by 42% from May 2009 peak, which is attributable to the fresh round of price hikes of 15-20% effected by developers since April 2010 that has dampened buyers’ sentiments,” wrote Aashiesh Agarwaal and Adhidev Chatopadhyay, analysts with Edelweiss, in a research note on November 16.
Developers started increasing the price substantially since April. The prices rose from 7% to 42% in the past six months following which sales stagnated. Even if the June-August period saw good volumes, it was lower in comparison to last year’s figures.
Ambar Maheshwari, director of sales advisory, DTZ, an international property consultancy, said: “There will be a price correction of 10% to 20%, but considering the pace at which the prices have gone up, these corrections would not help. People have to get used to the fact that home sizes are also becoming smaller. There has been a dip in activity for sure in Mumbai but putting a number to it would be difficult.”
Though most developers shy away from accepting that sales have been dropping, some do agree.
Abhishek Lodha, managing director, Lodha Group, said, “I think on an overall basis Mumbai sales are down, but as a company we still had sequential growth continuously for last 6 or 7 quarters. But, overall Mumbai sales are down by 15% compared to what it was 12 months ago.”
According to Anand Narayanan, director, residential segment, Knight Frank India, there is no upside left in the market for prices because of various corrective measures. “Last year, October-November was peak for high-end projects where we deal. This year was good but not as well as last year.”
Jones Lang LaSalle India research head Abhishek Kiran Gupta said in a research paper that the average sale price has gone up to Rs5,325 per square feet compared to Rs4,775 per square feet last year. Also, the quantum of discounts offered by developers, which hit a high at 20% in the first half of 2009, has now reduced to nil — 3%.
Data from the registrar’s office says that only 5,300 documents were registered during the last month, which is the lowest since last year.
The Edelweiss duo added, “We expect volumes will continue to be robust in 2010 with stable prices across India, except Mumbai, where we expect prices to correct 10% in the near term and revert to the April 2010 level.”
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