India's commercial capital is known to be the hub of expensive residential apartments. Be it expensive trophy properties in South Mumbai or basic 1 bedroom-hall-kitchen in the suburbs, Mumbai's real estate is always under limelight.
But what makes these homes so very costly, Anuj Puri, Chairman & Country Head of JLL India says is its geography, government policies and heavy-inward migration.
Puri says Mumbai's geography allows for only linear development unlike other cities that have circular development. Hence, the city's real estate can only grow from the South towards the North.
"A combination of factors such as distance from the Prime South city centres to the suburbs, coupled with lack of robust infrastructure connecting these places, has led to prices surging in the Prime city centres and the immediate peripheries such as Prime North (Bandra-Juhu) and South Central (Byculla-Chembur)," explains Puri.
Another reason for high prices, Puri, says is the government policies, with regards to its ready reckoner rates. In the recent years of 2013-2015, the Maharashtra government has been increasing ready reckoner rates by 15-20 percent across the city.
"This is a significant jump for a city whose prices are already on the far side of high - and considering that in other major cities, the increase was relatively moderate," adds Puri, highlighting that Gurgaon witnessed an increase of merely 10-12 percent during the same period.
Excerpts from the report:
- Slow infra development
The slow progress on infrastructure has not allowed the city authorities to open up new land parcels for development. Major projects such as the Mumbai Trans-Harbour Link (MTHL), coastal road network, the Navi Mumbai international airport, various phases of the proposed Metro links, etc. have made very slow progress in decongesting the city.
- Investor Activity
On the demand side, high investor activity always plays a big role in driving up real estate prices, and Non-Resident Indian investors comprise a significant chunk of residential real estate buyers in Mumbai.
- Heavy Inward Migration
While many Indians aspire to move to first world countries, this is an option only for those with the right education and skills. would find it almost impossible to 'make it' there. For the relatively low-skilled, the more feasible option is to move to big cities like Mumbai, where per-capita income is nearly double of the national average even if quality of life is poor. The constant need-based migration to Mumbai encourages landlords to hold onto high prices.
"The fundamentals that drive demand for homes in the city are the reason for Mumbai developers' apparent ability to defy gravity and keep residential prices so high. The fact is that sales are happening for all the above reasons - and they will continue to happen," concludes Puri.