A Scam Called Mumbai Realty: No Buyers But Soaring Prices
Not just home buyers but Mumbai developer too feel the pinch of the overheated real estate market owing to poor sales
. This evident as three property exhibitions have been cancelled in Mumbai until further notice.Maharashtra Chamber of Housing Industry didnt directly blame poor sales for this but mentioned some policy paralysis with civic agency. It is impossible that Real Estate is preparing for hibernation and a slow time correction, as stated by the Managing Director, Mr. Pankaj Kapoor of Liases Foras a real estate research firm. Property inventory stood at about 112 million sq ft across the Mumbai metropolitan region (MMR) as on December last year. In terms of prices, the weighted average value across the region in 2008 when prices of the property in Mumbai were at the peak. It was Rs 10,500 last year in December. During the correction phase in 2009 it dropped to Rs 5,300.
Are actual home buyers not investors really going to come to exhibitions when most Mumbai Property is way beyond the aam admis means. The demand is not picking up and inventory of 122 million sq ft was lying idle in December last year.
As study by land analysis firm Liases Foras had shown the weighted average value of a flat in Mumbai currently priced over Rs. 1 Crore. Liases Foras estimates that though interest rates come back all the way down to 9% from the current 14-15%, the realty market must bear a thirty three percent value correction to travel back to 2009 levels.
In such situation it is obvious that large bookings , which is what property in Mumbai fairs are meant for will not occur. There is another side as well. Maharashtras changing laws, duties, taxes and very slow clearing process means Mumbai developers have very few new residential property in Mumbai to showcase.
There is a general sense among their members that permissions are caught in a very bureaucratic table. Such delays are resulting in a value escalation as told by the President of MCHI Mr. Paras Gundecha. As Crisil report recently mentioned that there was no area for value cuts within the property in Mumbai. Crisil expects input prices to rise by 7-9% in 2012 and value moderations, if any would be low and restricted to southern and Central Mumbai.
Why are the costs of residential property in Mumbai not coming back down? Firstpost reported earlier, that the Mumbai realty market isn't driven by end-consumers however by investors. These investors are either FIIs, non resident Indians or perhaps politicians channelising their black cash into the arena. whats worse? Even though foreigners don't seem to be directly allowed to shop for land, the foreign cash coming into the housing sector is employed for nothing else however to shop for land.
Mr. Pankaj Kapoor, MD of Liases Foras explains, this tells us that land has almost been treated as a derivative that is traded with. Changes hand from owner to builder to PE Funds and rises in value through the process. Nothing was created. All the capital being lost and realty has become the mother of all scams.
The proposal to raise stamp duty in Maharashtra to 1,600 percent can solely validate additional that black cash can solely gain a lot momentum in Mumbais realty business.
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