While most developers continue to hold on to their sky-high rates,the discrepancy in the average price of sold and unsold residential stock in the Mumbai Metropolitan Region (MMR) is an indication of the extent of correction required in the housing market.
According to data collated by the real estate research agency Liases Foras,the weighted average cost of the stock that remained unsold over the last quarter (April-June 2012) is Rs 11,154 per sq ft. In comparison,the weighted average rate of the total stock that was sold is a steep 35 per cent lower at Rs 7,310.
This in effect shows that a 35 per cent correction is required in the existing rates for the market to be efficient, said Pankaj Kapoor,CEO of Liases Foras. In terms of the average price of an apartment,the cost in MMR is as high as Rs 1.12 crore whereas sold apartments have a relatively affordable average price of Rs 75 lakh.
Almost half the residential supply in the MMR comes from Mumbai alone but it accounts for only a quarter of the total sales. In Mumbai,sales have nosedived considerably by 33 per cent this quarter compared to the previous one with South Mumbai being largely responsible for the drop. In comparison,thanks to the affordable housing and easy finance schemes,quarterly sales figures show a significant spurt in sales in the extended suburbs and Navi Mumbai.
Kapoor explained that while the overall sales in April-June this year have jumped by six per cent over the previous quarter,the improvement is mainly owing to the offtake in the extended suburbs where people are compelled to move with Mumbai property prices spiralling beyond their reach.
While most realty analysts have by now written off chances of a price correction,Kapoor said Mumbai will see a correction similar to Bangalore,which didnt see any change in prices between 2008 and 2011.
In Mumbai,developers have sold much of their stock to investors through pre-launches,leaving no scope for price reduction. Furthermore,the new Development Control Rules (DCR) have spoiled developers calculations and most of them are preparing for a long hibernation as is evident in the mass retrenchments by several real estate firms, said Kapoor,adding that prices are expected to remain at todays levels for the next two to three years.
Over the past few months,several big realty firms have downsized their staff. In a bid to consolidate its manpower,a prominent developer with high-end residential and commercial projects in Central Mumbai asked several employees to move to their northern division.
Obviously those working in Mumbai for so long wouldnt want to make a sudden shift to Delhi or Gurgaon; all those who refused were sacked, said an employee. Similarly,several realty majors who were on a hiring spree during the realty boom are now laying off employees by the hordes.