Year when slowdown burst the real estate bubble

But the pretence did not go down well with customers. Aggressive bidding was no more the norm in the financial capital. Be it the ‘no show’ at the Bandra Kurla Complex plots sale in February or the lukewarm response at the NTC Finlay Mill land auction in December. Even sale and leasing of commercial, retail and residential space hit an all-time low in 2008. Liases Foras, a real estate research agency, estimates that from 44 million sq ft in June, the total unsold property in the Mumbai Metropolitan Region increased by 100 per cent to reach 80 million sq ft in December this year.

“It’s not that there are no buyers. It’s the mismatch between the product and the price escalation which drives the buyers away. For instance, why would someone pay Rs 60 lakh for a house that is two hours away from his workplace?” said Pankaj Kapoor, CEO of Liases Foras.

However, it was only a handful of developers who brought down the rates while others with deep pockets continued to hold on. Still others started peddling the new jargon of ‘nano housing’ i.e. affordable homes in a bid to win back estranged buyers. Developers, including those who wore their super exclusivity on their sleeve, began to construct smaller-sized flats targeted at the salaried classes. The glitch is that these homes were being constructed in the remote areas of Thane, Virar and Karjat.

With an eye on elections, the state government offered additional Floor Space Index (FSI) which translates into more buildable area for developers. Extra FSI was given out impartially to the poor and middle classes (Slum Rehabilitation Schemes, old buildings in the island city, MHADA’s low income and middle income colonies) and for the rich (star hotels). It was found to be a panacea to the city’s infrastructural woes and hence increased for Mumbai’s suburbs, townships and cluster redevelopment projects. Separate studies are looking at the possibility of raising the FSI cap for areas near the Metro rail and for the whole of Mumbai.

A draft bill for a setting up a housing regulatory commission was introduced in the state legislature early this year. But it was conveniently forgotten. The bill would have enabled the government to regulate prices of flats constructed for low and middle income groups, ensure mandatory builders’ registration and protected buyers’ interests.

Meanwhile, realty analysts say the coming year will see a further 25 to 30 per cent drop in rates. “Retail space will be the first to be hit followed by residential and commercial space. At this stage, no economic revival is going to help property prices. There was a 20 per cent price correction this year and next year there would be a 5 to 7 per cent price drop every quarter,” said Chetan Narain, CEO of Narains Corp Property Consultants.