Housing prices in Mumbai declined by 5 per cent on a year-on-year basis in 2017, the biggest in a decade, claimed a report published by real estate consulting firm Knight Frank India.
According to Samantak Das, chief economist and national director at Knight Frank, this 5 per cent drop in prices effectively translates to a total cost benefit of 11 per cent to 12 per cent for home buyers in Mumbai.
“Apart from the base price reduction, which developers have been forced to undertake in order to prioritise offloading inventory level, a bouquet of incentives such as waivers, free of charge floor rise and assured rental schemes, which are available a dime a dozen in the market lends significantly to the price advantage,” said Das.
For instance, a stamp duty charge waiver, a standard discount now, amounts to an additional 5 per cent cost benefit.
The Knight Frank report released Wednesday said prices in other Indian cities had reduced too. It said Pune saw a 7 per cent drop, while developers in Bengaluru and the National Capital Region cut prices by 5 per cent and 2 per cent, respectively.
Despite the price cut, dearth of meaningful demand has continued to hold back sales even though rising inventory, a major overhang in the last three years, has significantly declined.
The report said NCR and Mumbai had seen sales numbers increase by 21 per cent and 19 per cent on a year-on-year basis, respectively, during the second half of calendar year 2017. This increase, according to Knight Frank, can be attributed to the historic low base brought about by the government’s demonetisation drive. However, the July-December sales figures of these cities in 2017 were still significantly lower than the second half of 2014 and 2015, clearly depicting an underlying declining trend, the report said.
However, since developers are not launching new projects rapidly, the impact on unsold stock has been positive.
Unsold inventory levels had peaked in 2014 at 0.72 million units. According to the report, unsold stock declined across the country. In Mumbai, unsold inventory declined 25 per cent to 1,15,964 units. In the NCR, it dropped 11 per cent to 1,66,831 units. Across markets, level of unsold inventory dropped by 19 per cent to 5, 52,996 units.
The report said industry experts felt measures such as the RERA and the Pradhan Mantri Awas Yojana that were expected to boost sentiments of the home-buyer were yet to make any significant impact on the buyer who had little incentive to buy.
“The pace at which developers align themselves to the new regulatory norms and launch new products in the right ticket sizes that appeal to the homebuyer’s interests will determine the trajectory of the market going forward,” said the report.