The Indian real estate market has been witnessing a nationwide slump of sorts. This has mainly been attributed to a combination of factors revolving around the state of the economy. The Indian government has done little to revive the sector with cutting edge reforms and policies even though a few bills were passed in the year 2013. As a result, the industry is now awaiting the election results with a view towards praying for the formation of a stable government at the center. Why is this factor important for developers and real estate companies all across India? This necessitates a thorough study into the present condition of the real estate market in India. Firstly and most importantly, real estate is suffering owing to a severe lack of demand. Indian real estate thrived on huge levels of demand and this was considered to be a permanent factor given the levels of growth.
However, the poor economy and other factors have put the brakes on the steady progress of the Indian real estate industry. Why has demand dropped down to such levels? This mainly has to do with economic fluctuations and changing market conditions. Alongside, the extremely high prices of real estate in maximum areas has put paid to any hopes of attaining a home at affordable rates. This is proving to be the biggest reason behind the steadily dwindling demand especially in metro cities and major business hubs of India. On the other hand, suburban areas and projects situated on the outskirts of major cities are witnessing a tiny growth in demand owing to more affordable prices and better transport connectivity. Alongside, these areas are even witnessing an appreciation in their capital value with the steady development of infrastructure and social amenities in the region.
Surprisingly, demand in major cities like Delhi, Mumbai, Bangalore, Chennai and Kolkata has come down to surprising levels. High prices have severely affected the budget housing and mid level housing segment in major Indian cities including the top eight. Alongside, the premium and luxury segments have not been hit as badly as the entry and mid level areas. However, even these projects are struggling to find buyers owing to high prices of land and liquidity crunches. Developers are in a stressful situation right now and the major problem pertains to unsold inventory. Unsold inventory has gone up to unprecedented levels and is steadily piling up for major real estate companies.
Along with unsold inventory, the high prices of land are making it impossible for developers to reduce prices and offer homes at lower costs to buyers. They are now offering various discounts, special offers and other freebies in a bid to clear out their inventory. This makes it a win-win situation for buyers and investors who can afford it. Yet, the expensive nature of real estate purchases cannot be denied especially in a city like Mumbai in spite of forecasted price revisions and corrections owing to a slump in demand.
Mumbai is one city where the cost of acquiring residential real estate may just increase by leaps and bounds. Mumbai residents are praying for price corrections and revisions to take place and at the same time, the values of property in the city are rising steadily day by day. According to a study brought out by the noted real estate advisory and consultancy, Knight Frank India, it has been found that the values of residential land available in Mumbai have increased to the tune of almost 35.2 percent which is mindboggling and astonishing to say the least! The very fact that this has happened in the previous couple of years is another worrying factor. Land which is used for residential development has now become costlier and the increase in these prices is mainly attributed to factors like residential price hikes along with multiple norms of development.
What prospective customers and Mumbai residents do not realize that the values of built spaces have also been influenced by this increase in the values of residential land. Owning a home in Maximum City has become more and more difficult and expensive in the last couple of years and this is one harsh reality that prospective buyers and city dwellers have to accept without any real solution in sight. This is something that has affected the morale of all those aspiring to own a home in India’s financial and business capital. According to Darshan Vyas, Managing Director at True Value Realty, a Vadodra based brokerage firm, the overall pricing of built spaces is one aspect that is dynamic and all movement happens likewise in an effective manner.
According to Vyas, there are two major aspects that influence the cost of any built property these days, namely the cost of construction and the cost of land. The former is one aspect which is by and large stable as far as trends in both large and small cities are concerned. The latter is the factor that makes the real difference in this case. For instance, the cost of land is lower in places like Vadodra as compared to Mumbai owing to lower demand per square feet. High levels of demand and lower supply of residential spaces have now pegged values of land to exorbitant heights.
Values of property too have a relationship that is symbiotic with the values of land. This proportionate growth is behind the sudden appreciation in property values in Mumbai. This premier city is now one of the most expensive propositions for Indian buyers. Prices have largely appreciated to the tune of ten percent and this has even gone up to forty five percent in some areas. Appreciations have been observed in places like Navi Mumbai and Thane among others. According to Mehul Thakur, the Viva Homes director, the annual increase in prices of land in Mumbai is mainly due to the constrained supply of ample land along with the rising demand for quality residential property. The Mumbai real estate market will soon be on an upswing and positive market sentiments will again prevail after the elections.
According to Thakur, affordable housing is a pressing need in Mumbai and realtors should not scale up their prices any further in case of positive market sentiments as this will only serve to dampen the same and lower demand further to unacceptable levels. The focus should be firmly on affordable housing according to Thakur and many other industry professionals and experts. Whatever be it, residential real estate is set to become even more expensive in Maximum City!
Along with unsold inventory, the high prices of land are making it impossible for developers to reduce prices and offer homes at lower costs to buyers. They are now offering various discounts, special offers and other freebies in a bid to clear out their inventory. This makes it a win-win situation for buyers and investors who can afford it. Yet, the expensive nature of real estate purchases cannot be denied especially in a city like Mumbai in spite of forecasted price revisions and corrections owing to a slump in demand.
Mumbai is one city where the cost of acquiring residential real estate may just increase by leaps and bounds. Mumbai residents are praying for price corrections and revisions to take place and at the same time, the values of property in the city are rising steadily day by day. According to a study brought out by the noted real estate advisory and consultancy, Knight Frank India, it has been found that the values of residential land available in Mumbai have increased to the tune of almost 35.2 percent which is mindboggling and astonishing to say the least! The very fact that this has happened in the previous couple of years is another worrying factor. Land which is used for residential development has now become costlier and the increase in these prices is mainly attributed to factors like residential price hikes along with multiple norms of development.
What prospective customers and Mumbai residents do not realize that the values of built spaces have also been influenced by this increase in the values of residential land. Owning a home in Maximum City has become more and more difficult and expensive in the last couple of years and this is one harsh reality that prospective buyers and city dwellers have to accept without any real solution in sight. This is something that has affected the morale of all those aspiring to own a home in India’s financial and business capital. According to Darshan Vyas, Managing Director at True Value Realty, a Vadodra based brokerage firm, the overall pricing of built spaces is one aspect that is dynamic and all movement happens likewise in an effective manner.
According to Vyas, there are two major aspects that influence the cost of any built property these days, namely the cost of construction and the cost of land. The former is one aspect which is by and large stable as far as trends in both large and small cities are concerned. The latter is the factor that makes the real difference in this case. For instance, the cost of land is lower in places like Vadodra as compared to Mumbai owing to lower demand per square feet. High levels of demand and lower supply of residential spaces have now pegged values of land to exorbitant heights.
Values of property too have a relationship that is symbiotic with the values of land. This proportionate growth is behind the sudden appreciation in property values in Mumbai. This premier city is now one of the most expensive propositions for Indian buyers. Prices have largely appreciated to the tune of ten percent and this has even gone up to forty five percent in some areas. Appreciations have been observed in places like Navi Mumbai and Thane among others. According to Mehul Thakur, the Viva Homes director, the annual increase in prices of land in Mumbai is mainly due to the constrained supply of ample land along with the rising demand for quality residential property. The Mumbai real estate market will soon be on an upswing and positive market sentiments will again prevail after the elections.
According to Thakur, affordable housing is a pressing need in Mumbai and realtors should not scale up their prices any further in case of positive market sentiments as this will only serve to dampen the same and lower demand further to unacceptable levels. The focus should be firmly on affordable housing according to Thakur and many other industry professionals and experts. Whatever be it, residential real estate is set to become even more expensive in Maximum City!
No comments:
Post a Comment