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Mumbai home prices may fall as supply rises

In a trust-deficit market like Mumbai, selling under-construction projects is always a challenge, but the matter has been compounded with excessive competition and inflated prices.

March 17, 2024 / 20:06 IST
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In a trust-deficit market like Mumbai, selling under-construction projects is a challenge, but the matter has been compounded with excessive competition and inflated prices. (Representational image)

The boom in Mumbai realty was over in early 2023, which I pointed out in my February 2023 column, The slowdown in Mumbai real estate is here. Thereafter, sales have stayed at a steady run-rate of about 10,000 registrations per month on average (roughly 25 percent of which are redevelopment units). Expectations were high in the festive season of October – December 2023, but that turned out to be a disappointment. Why?

There are multiple factors at play. The pent-up demand for homes got soaked up between August 2020 to December 2022, and was followed by a 5X jump in the number of launches in many micro-markets. In a trust-deficit market like Mumbai, selling under-construction projects is always a challenge, but the matter has been compounded with excessive competition and inflated prices. That’s likely to result in individual builders selling fewer units per project (though aggregate demand remains much the same), in an industry that largely depends on customer advances for funding almost 40-50 percent of the project cost.

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What next?

1) Branded players likely to fare better: harsh as it may sound, the average Mumbai home buyer has terribly low expectations. He wants a lot, but knows that expecting anything more than smooth delivery of his home is unrealistic in most cases. Branded players offer him the hope that all his dreams will be fulfilled, on time. Hence, branded players in under-served markets will thrive even at elevated prices. Example: Godrej’s project in Raj Kapoor’s bungalow plot in peaceful Chembur, Rustomjee’s sea-facing project at Bandstand (Bandra), etc.