Mumbai may be second to Delhi in unsold homes,but it will take longer to sell them. Real estate developers in the financial capital must wait over three years to clear 1.13 lakh units or 120 million sq ft as high prices deter potential buyers,shows a study released by Liases Foras,a real estate rating and research consultant.
The study covers units in Mumbai Metropolitan Region (MMR) including Mumbai city,Thane,Kalyan and Navi Mumbai National Capital Region in Delhi,Pune,Hyderabad,Bangalore and Chennai.
The NCR market is primarily an investor market and has very little comparison with Mumbai, says Om Ahuja,chief executive officer (residential services) at Jones Lang LaSalle India. The real estate market in areas like Gurgaon or Noida attracts a lot of money from neighbouring states like Punjab,UP and Delhi as people invest in residential properties.
Among the six metros,Pune homes will be sold the fastest,taking just 14 months to sell its 43.06 m sq ft at the current pace of buying. A steep rise in interest rates in the last 18 months was seen as the key reason for low sales as buyers try to avoid high home loan instalments.
The Reserve Bank of India cut key rates by 50 basis points last month,forcing lenders to lower their retail lending rates which could push sales.
The reason for slow sales in Mumbai is the pricing of property in the city, says Pankaj Kapoor,founder,Liases Foras. Pune,which is closer to the Mumbai market,sees higher sales in residential units despite having just half the units Mumbai built. High costs paid for land in Mumbai,coupled with rising construction costs has skewed the pricing landscape which is affecting sales, says Kapoor.
In Mumbai,demand for under-construction homes has fallen significantly. Residential absorption in Mumbai at 33 million sq ft a year is now at its lowest since November 2009, says a report from Standard Chartered released on April 23.
The Liases Foras report says that Bangalore with 71.29 million sq ft and Chennai 42.75 million sq ft of unsold homes will be cleared off in 20 months. But Hyderabad may take 38 months to sell 33.82 million sq ft residential units as political unrest in the city pulls down sentiment.
There is a lot of upsurge in demand for residential property in cities like Pune,Chennai,Bangalore and Hyderabad because of affordability and jobs creation, says JLL’s Ahuja.
Real estate trade bodies Maharashtra Chamber of Housing Industry (MCHI) and the Confederation of Real Estate Associations of India (CREDAI) blame the longer time to get government approvals and high property prices to slow sales in Mumbai.
If the government brings down the project clearance time,it will help developers save on input and interest costs which will be eventually passed on to the consumers, says Boman R Irani,chairman and managing director,Rustomjee,Mumbai-based real estate developer and secretary of MCHI-CREDAI.
With ongoing delays in the approval process,around 16-18 million square feet of residential space is stuck every year in MMR, says Vyomesh Shah,managing director,Hubtown,real estate developer. According to MCHI-CREDAI,there are nearly 500 projects await just environment clearance.