Post Covid-19, a large number of homebuyers across the country have considered upgrading to bigger homes. The trend in Mumbai, the country’s most expensive real estate market, is no different. Data suggests that 1 BHK apartment owners have been upgrading to 2 BHK, and 2 BHK owners upgrading to 3 BHK ones.
In Mumbai, the launch ratio of 1 BHK apartments has gone down marginally by 5 percent, whereas the launch ratio of 2 BHK apartments has remained the same followed by the launch ratio of 3 BHK apartments going up by around 5 percent, according to the registration data of real estate regulator Maharashtra Real Estate Regulatory Authority (MahaRERA).
The data possibly indicates homebuyers residing in 1 BHK upgrading to 2 BHK and 2 BHK apartment owners upgrading to 3 BHK apartments, real estate experts said.
Further, launches of apartments in the calendar years of 2021 and 2022 have doubled compared to pre Covid-19 period in 2019 but there has been a 48 percent drop in the number of launches in the first half of 2023 compared to that of 2022, according to the data.
Experts have attributed several reasons like consolidation, stringent MahaRERA registrations and a slowdown in sales for the drop in the first six months of 2023.
Upgrade factor
According to experts, 2 BHK remains popular when it comes to launch ratio in the Mumbai real estate market.
"Around 80 percent of the new launches in 2023 were located in North and Central Mumbai, specifically above Dadar and Sion. The top areas with the highest number of new launches, surpassing 1,000 units, include Malad West, Andheri East, Vikhroli, Mulund East, and Jogeshwari East. About 30 percent of the new housing inventory consists of 1 BHK configurations, suggesting that affordability is a major concern among homebuyers," said Pune-based Rahul Ajmera, Developer at Vasupujya Corporation and member of data analysis wing at Confederation of Real Estate Developers' Associations of India (CREDAI)- apex body of real estate developers.
Ajmera, who did an analysis based on the data available from the website of MahaRERA, added, "However, there has been a growing preference for larger apartment configurations of 3 BHK and whereas launch ratio of 2 BHK has almost remained the same. This possibly indicates the trend of upgrade by home-owners residing in 1 BHK shifting to 2 BHK, and 2 BHK home-owners upgrading to 3 BHK apartments."
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Launches spike post Covid-19
In Mumbai, around 34,000 units were launched in the calendar year 2019, which dropped to 25,000 units in 2020 owing to the Covid-19 lockdown. However, in 2021 and 2022 the launches went up hugely to around 55,000 and 73,000, respectively. However, in the first six months of 2023, around 27,000 units were launched compared to around 48,000 units in the first half of 2022.
The launch ratio of 1 BHK units in 2023 went down to 29 percent from 34 percent in 2019 and for 2 BHK stood the same at 38 percent followed by for 3 BHK apartments it went up to 15 percent in 2023 from 11 percent in 2019. Launch ratio is the percentage of a particular type of launched configuration out of the total launched units.
Consolidation by small players
According to real estate developers, one of the reasons for the drop in the launches in 2023 is consolidation by small players.
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"The new launches in Mumbai increased post Covid-19 and there were various reasons like the increased scope of getting additional floor space index (FSI) due to Development Control and Promotion Regulation 2034 since 2021, followed by a 50 percent waiver in premiums paid by developers to authorities,” said Keval Valambhia, Chief Operating Officer (COO) of CREDAI-MCHI, an apex body of real estate developers.
He added, “However, in the last one year, the launches might have slowed down. The reason is that there is a lot of supply in the market, small players who dominate around 40 percent of sales in the market are finding it difficult to sell in the past few months due to oversupply, and they are consolidating. Another reason is that MahaRERA registration is rightfully becoming stringent this year, which also may have contributed to registrations/launches going down.”
Slowdown in sales?
Meanwhile, according to real estate consultants, another reason for launches going down in Mumbai is a slowdown in the primary market.
"In the last three months, there has been a slowdown in Mumbai’s primary market. However, demand and sales for ready-to-move-in apartments are better, and deals are being closed compared to under-construction projects,” said Ravi Kewalramani, Director at RK Mumbai Realtors, a real estate consultancy firm.
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He added that developers are positive but holding back on launches in Mumbai and are keeping a close watch on the market. “There is a lot of supply and upcoming elections in the country and state will also play an important role for developers wanting to launch projects in the next one year,” he said.
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