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Ganesh Chaturthi marks the start of the festive period. It is a time, when developers strive to clear their old stock, increase sales and capitalise on the positive sentiment. For home buyers, the festive season translates into good deals and offers on property transactions. Hence, this period brings a win-win situation for all stakeholders in the real estate sector. However, this year, Ganesh Chaturthi will be celebrated in a scenario, where the Indian rupee is depreciating against the US dollar and home loan interest rates are inching upward.
Mumbai real estate market overview
Anuj Puri, chairman of ANAROCK Property Consultants, says that “As per ANAROCK data, out of the total new supply (of approximately 1,14,400 units) from January to August 2018 across the top seven cities, the Mumbai Metropolitan Region (MMR) saw the maximum new launches, with nearly 35,800 new units. On the sales front too, the region clocked maximum housing sales with approximately 15,200 units being sold in Q2 2018, an increase of 26 per cent against the previous quarter.” Despite the gloom over rising prices, experts, hence, expect to see an uptick of 10-15 per cent in residential sales velocity during the festive season, due to various promotional schemes offering direct/indirect reductions in the prices of apartments.
Ravi Ahuja, senior executive director, Mumbai and developer services, at Colliers International India, points out that developers are rolling out discount schemes and freebies, to lure home buyers, to address the issue of inventory build-up. “Developers usually launch discount schemes, in the form of various interest subvention schemes, offering flexible payment plans to buyers with 10 per cent or 20 per cent down payment and the rest on possession. Developers also offer freebies, especially in the case of ready-to-move-in apartments, in an attempt to lure buyers to reduce their inventory overhang,” he explains.
Challenges faced by Mumbai’s realty market, during the festive period
Despite the positive environment, the proposal by the state government to levy a surcharge of one per cent on stamp duty (resulting in an increase to six per cent from the existing five per cent), could prove to be a dampener in the short-term, as property prices will rise further. A major impact of this increase, is likely to be felt in the affordable housing segment.
Other challenges for Mumbai’s real estate market:
- Inventory build-up and high cost of borrowing.
- Meeting regulatory requirements, with respect to RERA.
- Procuring multiple approvals from government authorities.
- High GST rate and rising input costs.
- Increase in home loan interest rates
Although interest rates have increased in the recent past, they remain low, compared to 2011-2012. Additionally, tax exemptions available on home loans, under sections 24B and 80C, help reduce the effective home loan interest rate for borrowers. The government’s decision, to relax the eligibility criteria by increasing the carpet area to 160 sq metres for MIG-I and 200 sq metres for MIG-II houses, will also encourage home buyers, especially in smaller towns.
Property hotspots for the festive season beginning with Ganesh Chaturthi 2018
Home buyers looking at the affordable and mid-segment housing, should focus on Thane and Navi Mumbai, as these locations, with their excellent infrastructure and cosmopolitan nature, have emerged as sought-after peripheral destinations. “Premium locations like Bandra west to Andheri west, will remain in-demand and given the 10-12 per cent price correction in older buildings, one can use this as an advantage, to buy for current or future end-use,” suggests Ahuja.
Niranjan Hiranandani, CMD of Hiranandani Communities and national president of NAREDCO, maintains that property prices have remained static in most micro-markets across the MMR. “Moreover, there is a possibility of further sweetening of the deal from the developers’ side, at the purchase stage. Given these two factors, I would say that in most micro-markets, property prices across Mumbai are attractive for home buyers,” he concludes.