Indian real estate services firm JLL says the aggregate sales of residential units in Mumbai has risen 28 percent on a year-on-year basis, hinting at a significant improvement in an otherwise lacklustre market.
Ramesh Nair, chief operation officer and international director, JLL India, says the increase in sales could be attributed to fence-sitters having realised that a price correction of sorts has already happened - given that the capital values have not gone up in the last two-three years despite annual inflation of 5-8 percent - and have started making purchase decisions.
"Capital values have not gone up despite construction and land costs having gone up in the last three years," says Nair.
"Given that selling price is the sum of the above mentioned costs plus developer's profit and that the cost component is only going up, there is meagre chance of prices going down," he says.
Here's what also aided higher sales- affordable apartments. JLL says developers have been maintaining affordability of apartments by reducing the average apartment sizes in the city by roughly 6 percent annually. There has been a 26.4 percent reduction in apartment sizes in Mumbai from 2010 to 2015, adds the report.
Furthermore, JLL says apartment prices in the city are unlikely to go down, due to over-supply and drop in new launches in first six months of 2015 as compared to the corresponding period in 2014.
But prices may rise!
Mumbai's potential home owners should bear in mind that new launches in the city are down 26.5 percent in 2015 compared to 2014. This lower supply could lead to rise in apartment prices.
Apart from introducing new taxes like the Local Body Tax (LBT), hiking stamp duty, ready reckoner rates, development charges etc, the fact that getting approvals still continues to take longer could result in developers' hiking prices.
Some respite in sight?
For realty prices to come down in Mumbai, JLL says connectivity from the city's centre to peripheral areas need to be improved. Introduction of bullet trains to help commuters reach Virar from south-Mumbai or the Sewri - Nava Sheva sea link, that can reduce travel time from south Mumbai to Navi Mumbai to 20 minutes.
However, this kind of infrastructure upgradation, JLL highlights, does not happen quickly in India and is nowhere in sight for Mumbai.