The real estate market may be buoyant about the sector slowly inching towards recovery after a long lull,but the market has never really bounced back for home buyers from the 2005 peak. Figures collated by Newsline from the registration office show that sale of homes in Mumbai had hit a peak in 2005,when the market was most efficient,with 89,843 houses being sold that year.
In a sign of the sharp rate at which realty prices have soared since then,as also heavy investor presence,home sales have been plummeting thereafter the only jump was from 57,344 in 2009 to 79,909 in 2010 and only 63,501 properties were registered in 2011.
This is a sharp 30 per cent decrease despite a manifold increase in number of residential projects in recent years.
Realty analysts state that from 2005-2006,it has been cataclysmic for the housing market in Mumbai in many ways. A variety of factors such as aggressive mill land deals,opening of the segment to Foreign Direct Investment (FDI) as well as an artificial choking of supply paved the way for a speculative investors market.
It was in 2005 that the National Textile Corporation (NTC) sold its five mill land parcels at record rates to realty majors such as DLF,Indiabulls,Lodha and Kohinoor group triggering a ripple effect that struck at the very base of housing affordability.
Pankaj Kapoor,CEO of real estate research agency Liases Foras,points out that a perfect example of this is Sheth developers increasing prices in its Beaumonde project in Dadar overnight by 100 percent after the nearby Kohinoor mills was snapped up by Raj Thackeray and Unmesh Joshi,son of Sena leader Manohar Joshi,at an eye-popping rate in July 2005. The prices at which mill land deals took place were most unproductive and no project was viable at that high a cost. While a couple of those projects havent taken off till date,others raked in a profit by getting the government to increase the FSI in specific cases. However they effectively jacked up property prices across Mumbai, said Kapoor. The average per square foot rate for a house,which was Rs 2,600 prior to the mill-land deals,was catapulted by 400 per cent to Rs 10,800 per sq ft over the next seven years.
According to Liases Foras data,2005 was also when home loan interest rates were at its lowest at seven-eight per cent,coupled with a low inflation.
Until then,residential projects were financed by proceeds of sales to end-users. This changed in 2005-06 when a lot of money started pouring in from FDI and private investors making the property market capital-driven. Between 2001 and 2005,Mumbais realty prices grew by only eight per cent year-on-year. Since then,the annual price increase has been 21 per cent even as the increase in income has been only 11 per cent, said Kapoor. Post 2005,a total of Rs 48,820 crore has come by way of FDI into the Indian realty market (in addition to domestic funds),40 per cent of which fuelled Mumbais realty market alone.
In recent years there has been a huge affordabily gap with prices crossing all levels. A comfortable house in Andheri was available for Rs 30 lakh a decade back. Today one will have to go to Nallasopara or Kalyan to get one at that price, said Gulam Zia of Knight Frank.
He added that the sky-high rates have driven people to peripheral areas such as Kalyan-Dombivli,Vasai-Virar and Mira-Bhayander. In fact,figures released by the census directorate earlier this year shows that of the 35 districts in the state,the South Mumbai belt is the only one to have actually witnessed a decline in number of households between 2001 and 2011 even as nearby districts such as Raigad and Thane have registered exponential population growth in this period. The data also shows that as many as 4.79 lakh houses are lying vacant in Mumbai mainly due to high prices.