Anuj Puri, Chairman – ANAROCK Property Consultants
Real estate prices in Mumbai – India’s high-flying financial capital – are never out of the news. From South Mumbai’s spectacularly pricey trophy properties to the chronically unaffordable price tags of what passes for mid-income and affordable housing in the city, there is no getting over, under, around or through the extremely high property prices in Mumbai.
Mumbai’s sky-high real estate rates – what lies beneath?
Before we go into which parts of Mumbai can still reap decent returns on real estate investment, it is important to understand why the city was such an investment hotbed in previous years – and in fact still draws patient, well-capitalized investors. Of course, the city’s extremely steep capital and rental values were (and continue to be) their primary incentive. There are several reasons for Mumbai’s exorbitant property prices – some are logical and have to be accepted as facts of life here, while others have more to do with unabashed market manipulations.
Another major issue is that a huge chunk of Mumbai’s already chronically challenged land resources are locked in slums and buildings which crossed their ‘expiry dates’ ages ago. For one reason or the other, this land is not getting deployed for development – or only in small dribs and drabs which are insignificant in market terms. Efforts to rehabilitate slum dwellers in the Prime city centers have been largely unsuccessful, either because of lackluster implementation or inability to bring the inhabitants of these slums – most of which are politically controlled – on board.
Mumbai’s developers had made wooing NRI and PIO investors a major part of their marketing outreach and had even opened offices in the target countries to that end, often managing to offload 50% or more of their inventories to such cash-rich investors before local brokers got so much as an inkling of what was going on. The result? Vastly inflated prices.
To a backdrop of the incessant demand for more rational property prices in the financial capital, the above factors can nevertheless not be denied or dispensed with. When the prices began from such a high base, be it artificially induced or logical, the fundamentals that drove up residential property prices in Mumbai were the basis for the city’s developers’ apparent powers to defy gravity and keep property prices so steep. And more importantly – despite the gloom-and-doom analyses and prediction, sales to end-users continue to happen for the above reasons. But what about sales to investors? That is another story altogether.
Does Mumbai Real Estate Still Attract Investors?
Many of the recent developments on the real estate front have caused most of the previously gung-ho property investors to evaporate – but they are still around, and are waiting for things to improve. At a India-level, the ratio of end-users vs investors currently stands at 70:30, while five years ago it was 55:45. For better or worse, this figure will improve once the disruptive policy changes and negative sentiment give way to greater confidence and better returns. For now, most real estate investments in Mumbai are happening in specific areas which have the right fundamentals for both current and future ROI growth.
Locations Which Retain ROI Growth Potential – demand drivers, supply & prices
Ghodbunder Road, Thane
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