New residential projects have made a comeback in Mumbai in the January-June period, and despite a 9% decline in real estate prices, sales remained stagnant, Knight Frank India said in its half-yearly report. In commercial realty, lack of quality office space restricted growth in transactions during the six months, it said.
“In the backdrop of the first half of 2017, a period of the Real Estate Regulatory Authority Bill (RERA) and goods and services tax implementation, Mumbai’s residential market witnessed 128% year on year (YoY) growth in project launches in the first half of 2018. This was primarily driven by the dumping ground reprieve in the city and mega project unveiling in the peripheral suburbs,” said Dr. Samantak Das, Chief Economist & National Director, Research, Knight Frank India.
In March this year, the Supreme Court lifted a Bombay High Court construction ban in Brihanmumbai Municipal Corporation (BMC) limits for six months which resulted in many new project launches. In 2016, the HC had imposed a construction ban in Mumbai as the Deonar and Mulund dumping grounds had exhausted all their capacity to accommodate any construction scrap or solid waste. While asking the BMC to look for another dumping ground, the HC had imposed a ban on all new constructions, barring redevelopment projects. Even though the BMC has not provided any new dumping ground, the SC stepped in to give a reprieve to builders.
Mr. Das said most developers have focused on reducing apartment sizes in their new projects. “Accordingly, we have seen shrinkage of 12% in apartment sizes across the Mumbai Metropolitan Region (MMR), with some premium markets witnessing a reduction of as high as 31%. Further, besides the nominal price drop across markets, developers are also offering a host of other incentives to entice buyers,” he said. The incentives included a 24-month rent assurance, stamp duty waivers and no floor rise charges, among others. As per the report, Mumbai city (the BMC region) witnessed the highest growth in supply following the dumping ground reprieve.
Stagnant sales
The period witnessed a 9% YoY decline in weighted average prices across MMR, with prices declining across markets. In addition to reduction in prices, residential sales were stagnant, recording a marginal 1% YoY growth over the first half of 2017, and unsold inventory was lower by 14% YoY. The office market has been steady, with rentals growing across business districts; however, the growth in transactions was restrained by lack of supply. “Scarcity of quality office space in desired markets like Bandra Kurla Complex and Lower Parel has restrained expansion plans of occupiers,” Dr. Das said. The new office space supply was lower by 42% YoY, and transactions were lower by 7% YoY.
