With Mumbai’s real estate sector activity shifting northwards, a trend that is amply reflected in the surge in prices in that part of India’s business capital, south Mumbai’s billing as the country’s costliest real estate hub seems to be under threat. While the overall real estate market in the city has been tepid over the past few years, marked by a high inventory pile-up due to increased supply and subdued demand, the inventory pile-up in south Mumbai appears to be the most worrying.
“The inventory pile-up in south Mumbai is high not in terms of the quantum of inventory, but in terms of the quarters-to-sell ratio, which refers to the number of quarters it will take to clear the unsold stock. South Mumbai consumers are very informed. They are generally the first ones to pull out in times of a slowdown and also the first to be flamboyant when there is a recovery. The reason for the low velocity of sales is the overall sluggishness in the market,” said Samantak Das, chief economist and director of research at Knight Frank India.
According to data from real estate consultancy firm Knight Frank, the inventory level in the south Mumbai market as of June 2014 will take about 18 quarters, equivalent to 4.5 years, to sell, compared with an average period of three years for the unsold inventory for the entire Mumbai Metropolitan Region to clear.
Data from the consultancy firm further shows that the age of the inventory in south Mumbai, comprising areas such as Malabar Hill, Napean Sea Road, Walkeshwar, Altamount Road, Colaba and Cuffe Parade, is also the longest, with houses there lying unsold for 15 quarters on an average. The high stock of unsold houses is despite the fact that new launches in south Mumbai areas have been very limited due to scarcity of land. Of all the new projects launched in Mumbai over the past two years, less than one per cent of them have been in south Mumbai.
Pankaj Kapoor, managing director at Liases Foras, a Mumbai-based real estate research firm, said, “All the projects in south Mumbai are falling in the ultra luxury segment so the prices are extravagant. Affordability is a factor that is denting sales across Mumbai. For south Mumbai residents, price has not been a major factor, but the rise in residential property prices in south Mumbai over the past decade has been massive and there is not much demand at the price. For example, the rates in areas where a property was available for Rs 20,000 per square foot years ago have not shot up to about Rs 70,000 per square foot.”
The ultra luxury projects promise features such as valets, concierge services, multiple swimming pools, spas, gymnasiums, sun-decks, pool villas, walk-in closets and the city’s best views, but command a price upwards of Rs 20 crore. A study by Liases Foras had found that almost half of these premium residences remain unsold.
For instance, a project involving grandiose 15,000-square-feet duplexes in a 55-storey under-construction scraper on the chic Napean Sea Road has not sold a single unit in six years. The project offers the country’s perhaps costliest residences priced at Rs 100-120 crore each. Similarly, sales have also been languid in projects in south Mumbai by major real estate firms such as Indiabulls Bleu in Worli, DB Realty’s Orchid Heights and Orchid Turf view in Mahalaxmi and Razzak Heavens by Orbit group on Napean Sea Road. Some of these projects are also delayed due being caught in the snare of clearances.
Om Ahuja, chief executive of the residential services division at JLL India, a real estate consultancy firm, said the issue is also that most of the piled-up inventory is unusable. “There is no real inventory available in the south Mumbai market. Most of it is projects that have been going on for the past 7-8 years, but have not been completed. There is no supply in the south Mumbai market and hence the price is not correcting like it did in the western suburbs. Technically, there is no intent by developers when it comes to completing projects here in a timely manner. Developers have over-leveraged by launching projects in this part of the town so as to buy land somewhere else on the outskirts of the city.”
Ahuja also said that with the city expanding northwards and Bandra Kurla Complex having taken over from Nariman Point as Mumbai’s primary business district, south Mumbai areas are losing their charm. “There has been immense appreciation in the prices of residential units at Bandra, Khar and Santa Cruz, while the prices of residences in Cuffe Parade have remained stagnant at more or less the same level,” he added.