Major developers are scaling down luxury launches in Mumbai, India’s largest housing market, and shifting their focus to affordable, mid, and premium segments after nearly two years of euphoria in the high-end space.
Brokers and market observers said that sales are plateauing in the luxury segment amid stock market volatility driven by global cues, steep price increases, and a huge demand-supply gap in lower ticket-size segments.
With the Reserve Bank of India reducing repo rate by 50 basis points and first-time homebuyers resuming their hunt for new homes in the affordable and mid segments, developers are once again eager to cater to demand in that vertical, which had seen launches plummet over the last two years, they added.
"Multiple factors are driving the new push towards more affordable, mid, and premium launches. The global cues are uncertain, with the India-Pakistan conflict in May, or the ongoing tensions in the Middle East, and that is reflected in the stock market. Developers are thus looking at lower ticket sizes to drive sales and shore up their margins," said Chintan Vasani, founder and managing partner at Wisebiz Realty.
Market sources said that sales in marquee luxury projects in Mumbai, both in the island city and suburbs, have halved in some cases — particularly in south-central Mumbai and parts of the western suburbs.
However, others contended that the recent slowdown in sales from historic highs in 2023 and 2024 is not a reflection of underlying weakness in the segment, which continues to attract buyers, with Mumbai also recording the most expensive residential real estate deal ever in June, at an under-construction project in Worli.
Falling luxury launches
Launch activity during the April-June quarter, however, has reflected uncertainty in the market. According to data shared by Anarock, launches in the Mumbai metropolitan region were down by 36 percent year-on-year to 28,165 units in April-June. Prashant Thakur, Anarock's head of research and advisory, noted that around 59 percent of new launches during the quarter were priced up to Rs 80 lakh, and only 8 percent of the new supply was priced more than Rs 2.5 crore.
This also comes at a time when sales have slowed, especially in the upper end of the market, due to global geopolitical uncertainties, such as the India-Pakistan clashes and the ongoing Middle East crisis. This, in turn, has kept capital markets in a flux, sending would-be buyers into a wait-and-watch mode.
According to data collated by Knight Frank India, registration of new properties in Mumbai declined month-on-month throughout the quarter ended June 30. Registrations in May and June reported year-on-year declines as well, by 4 percent and 1 percent, respectively.
After a prolonged euphoria in the luxury homes (priced Rs 5 crore and higher) segment, recent sales in that category have flattened slightly in Mumbai. Knight Frank India's data shows that in June, the share of registrations for properties priced Rs 5 crore and higher was flat year-on-year at 6 percent, while the share of properties priced Rs 1-2 crore increased two percentage points to 33 percent over the same period.
The geographical spread of the new launches has also widened, reflecting developers' strategy to capture more of the affordable market, Anarock's Thakur added.
"Most of the new launches in the quarter have happened across the peripheral central suburbs and peripheral western suburbs, including Naigaon and areas in Kalyan-Dombivali Municipal Corporation (KDMC), due to ample availability of land and low land cost. Better connectivity to these areas from other prominent areas is prompting many small as well as large developers to launch projects as demand has also been going up due to relatively affordable property prices here," Thakur said.
Focus on mid segment
Even within the municipal limits of Mumbai and Thane, both of which have seen above-normal price increases over the last year, developers are aiming for the under-Rs 10 crore segment to drive sales. Newly-listed Kalpataru Ltd's management noted that 80 percent of its portfolio is priced at Rs 10 crore or less, while Raymond Realty, which was demerged today from its parent Raymond Ltd, is targeting the Rs 3 crore to Rs 8 crore segment as its sweet spot in terms of ticket sizes.
Other developers, such as Adani Realty, are also expected to bring a large volume of affordable-to-mid ticket supply to the market when it launches the first phase of the Dharavi redevelopment project's free sale component. DLF, India's most valued developer, is entering the Mumbai market in the premium category, with inventory at its upcoming Andheri project expected to be priced between Rs 5.5 crore and Rs 7.5 crore.
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