It’s been a difficult year for the real estate industry with property registrations in Mumbai steadily declining since the beginning of financial year 2017-18, according to data accessed from the office of the Inspector General of Registration and Controller of Stamps.
In October, for which the latest property registration data is available, there were 15,597 registrations in Mumbai division, down 23.41 per cent from 20,365 property registrations in April this year. To be sure these property registrations include agreement to sale, conveyance deeds, mortgage deeds, leave and licence agreements and gift deeds. Even the revenue collections from stamp duty in the first seven months of fiscal 2017-18 in Maharashtra — one of the top realty markets in the country — has been muted at Rs 15,298.3 crore due to low consumer demand in the real estate segment. The state government collected Rs 21,052.6 crore from stamp duty in 2016-17, a little lower than Rs 21,767.01 crore collected in 2015-16.
Experts in the real estate sector say while there is an uptick in sales since the demonetisation in November 2016, the property market in Mumbai is unlikely to correct anytime soon. “We have experienced four disruptions — Insolvency and Bankruptcy Code, demonetisation, RERA and the Goods and Service Tax (GST) in a year. Different real estate markets in the country have reacted to these in different ways. It will take some time for the sector to stabilise,” said Niranjan Hiranandani, co-founder and managing director of Mumbai-based Hiranandani Group.
According to data on MahaRERA website compiled by property consultant Cushman & Wakefield and Propstack, nearly half or approximately 3.5 lakh homes in the Mumbai Metropolitan Region (MMR) have remained unsold.
Pankaj Kapoor, managing director of real estate research firm Liases Foras, said the stagnancy in the real estate market is due to structural issues than temporary shocks such as demonetisation. “In the last ten years a lot of investment has flowed into the real estate sector and most of the land purchases by the developers have been at a very high price. As a result, between 2005 and 2017, the property prices have increased up to five times. However, the salaries of people have not increased in the same way. So the sales have not grown as the property prices are still unaffordable for consumers,” said Kapoor.
Kapoor said the property prices in Mumbai may not ease any further as most of the developers have bought land at a high cost.
Real estate developers said while there is a steady demand for housing, consumers currently are deferring their plans to invest in underconstruction properties as it attracts 12 per cent GST, an increase of 6.5 per cent for buyers.
“There is a good demand for finished projects; however, underconstruction properties have suffered a blow as the 12 per cent tax is pinching a lot of buyers,” said Sandeep Runwal, director of Runwal Group.
Hiranandani said the National Real Estate Development Council (NAREDCO), an industry body, has made a representation to the government, asking it to bring down the tax on underconstruction properties from 12 per cent to 6 per cent.