Even as the housing stock in the city is on the rise, the sales are plummeting, but property prices continued to go up and have now reached an all time high. According to a report released by Liases Foras, 146.10 million sq ft inventory lay unsold in the Mumbai Metropolitan Region (MMR), which is equal to around 1.35 lakh flats.
However, the average price per square feet in Mumbai has increased from `5,353 in 2009 to `11,765 in 2013.
The quarterly report for the period from April 2013 to June 2013 shows that the number of unsold flats in the MMR is going up every quarter. “The first quarter of this fiscal year 2013-14 has been subdued for not only the MMR, but the entire Indian realty market. This was probably one of the worst quarters in terms of sale across all cities,” said Pankaj Kapoor, managing director of Liases Foras.
Interestingly, the prices in the MMR also went up despite low demand. From January 13 to March 13, average property price was `11,626 per sq ft that went up to `11,765 per sq ft between April 13 and June 13.
According to the quarterly report released by Liases Foras, there was 146.10 million sq ft of unsold inventory in the MMR, which is equal to almost 1.35 lakh flats. If the average rate of the unused inventory is `11,765 per sq ft, it converts into `1,71,886 crore, which includes the city and its satellite towns. Reports also indicate that it will take another 42 months to sell all these unsold flats, given the pace in last three months, provided builders do not launch other projects in the next 42 months, which is not possible. However, several new projects have been launched of late, which means that the inventory will pile up further, the report states.
“Property prices have gone up by 22 per cent in the last year, while the citizens’ average income has risen by only ten per cent. This means that there is a huge disparity between the earning capacity and spending requirements,” said Mr Kapoor.
Explaining the reasons behind the poor sales, Mr Kapoor said, “It is due to the high prices. In most of the markets, prices have almost doubled from 2009, while the incomes have not risen. High prices have made the housing unaffordable; therefore sales have been slow over the last 2-3 years. Since, other avenues of raising funds are also limited, the developers are faced with liquidity crunch.”
Experts are of the view that there is a slump in the real estate market in various segments across the tier 1, tier 2 and tier 3 cities. Barring a few south Indian cities like Bengaluru, most of the markets have been witnessing very slow sales, resulting in the rising inventory prices. “The biggest culprit is excessive money resulting in escalating land prices. FDI, private equity and black money have created the urban economic imbalance. Now, the onus is on the builders who should lower the rates without further delay to kickstart the sale of unsold flats and revive the economy of the country too,” said Mr Kapoor.
However, Anand Gupta, ex-president of the Builders’ Association of India (BIA) had a different opinion. He said, “It would be improper to say that these 1.35 lakh flats are ‘unsold’. Rather, it should be termed as ‘unused’ flats because builders have already sold most of these flats to the investors, who are looking for the right time to sell it.” However, Mr Gupta also admitted that, “Builders are likely to face liquidity crunch in the near future, if they do not unlock the sale by reducing the prices.”