300 The Masterbu||der - JuIy 2012 www.masterbu||der.co.

|n
ReaIty
res|dent|a| market or June, the wa|t
cou|d pay o.
More Unsold nventory piling up as a
result of theSinkingDemand:
W|th on|y 45,000 apartments so|d |n
the Mumba| metropo||tan reg|on dur|ng
2011-12, we|| be|owthe market average
o 70,000 to 80,000 un|ts annua||y, the
uture o rea| estate |n the metro seems
s||ght|y shaky w|th such d|sappo|nt|ng
he Mumba| rea| estate market or
h|gh-end homes has stagnated
Tdur|ng |sca| year 2012 as buyers
have |arge|y kept away rom the market
expect|ng an |mpend|ng d|p |n pr|ces |n
the near uture. Kn|ght Frank Pesearch,
a property consu|tancy |rm, ana|yzed
res|dent|a| market compr|s|ng pro|ects
w|th a sa|es potent|a| o above 30
crore |n the Mumba| Metropo||tan Peg|on
(MMP). Accord|ng to the|r study o the
absorpt|on rate. Absorpt|on numbers
|n FY 2012 are est|mated to have
dropped by more than 60% rom |ts
2007 hey days and 35% rom FY 2011
to anest|mated 45,000.
The Mumba| market current|y has
anunso|d|nventory tothetuneo 80,000
un|ts wh|ch |s approx|mate|y va|ued at
lNP 1,050 b||||on at current pr|ces. But
pr|ces cont|nuetostay h|ghdesp|teweak
demand. But a comb|nat|on o r|s|ng |n-
!me 0|g 3quee/e
\u~oo| eve|ope|s 0oll|e umso|o |mvemlo|y -||e-up
Mumbai Bureau Report
301 www.masterbu||der.co.|n The Masterbu||der - JuIy 2012
ReaIty
ventory and h|gh |nterest rates cou|d
orceacorrect|on|npr|cesshort|y, argues
the report. Th|s unso|d |nventory con-
st|tutes 37% o the tota| res|dent|a|
supp|y under construct|on. "The |nves-
tors segment that makes up approx|-
mate|y 20% o the market demand has
been observed to be act|ve|y o|oad|ng
|ts rea| estate ho|d|ngs, thereby add|ng
s|gn||cant shadow supp|y |nto these
m|cro-markets" the report e|aborated.
t|zed w|th|n our to s|x quarters |nstead
o the current|y est|mated e|ght to ten
quarters, as per the study.
Concentration in Northern Suburbs of
MMR:
The core res|dent|a| market |n
Mumba| |s stead||y sh|t|ng north o the
Mumba| Metropo||tan Peg|on as peop|e
move away rom the centra| bus|ness
d|str|cts to buy a home that |ts the|r
budget. An est|mated 73% o the tota|
res|dent|a| un|ts under construct|on |s
concentrated on the northern r|nges o
the Mumba| market.
Deve|opers are |ook|ng to tap |nto
the |argest chunk o buyers |ook|ng or
apartments pr|ced up to lNP 7.5 m||||on.
Thus, an est|mated 55% o un|ts under
construct|on present|y be|ong to th|s
pr|ce bracket.
Economic Slowdown and Rising Can-
cellations acauseof worry:
Deve|opers |n a b|d to ||qu|date the|r
h|gher-pr|ced |nventory have been
more open to negot|at|on |n the prem|um
segment, reduc|ng pr|ces up to a max|-
mum o 25 per cent or the sake o a
s|zeab|e upront payment. The number
o cance||at|ons |s on the r|se |n the |ast
ew quarters |nd|cat|ng the |nvestors
worry.
Pro|ect approva|s that were pract|-
ca||y sta||ed|n 2011, have startedcom|ng
through aga|n as the Deve|opment
Contro| Pegu|at|ons were amended
ear|y th|syear. However, demand|s||ke|y
to rema|n subdued due to the preva|-
||ng uncerta|nty |nthe economy.
FuturePricingExpectations:
The stagnant rea| estate pr|ces today
suggest a sta|emate between buyers
andse||ers, but market |nd|catorsstrong|y
h|nt at an |mm|nent |n|ect|on po|nt. The
|ncrease |n|nventor|es coup|ed w|ththe
ongo|ng s|ack |n absorpt|on wou|d put
downward pressure on pr|ces. Mumba|s
res|dent|a| property market w||| stagnate
over the next coup|e o years unt|| pr|ces
dec||netomatchaordab|||ty and|ncome
|eve|s r|se.
NewProject Launches put onhold:
The Nav| Mumba|, per|phera| western
suburbs andThane m|cro-markets have
seen comparat|ve|y h|gher number o
pro|ects |aunched |n the prev|ous two
quarterscaus|ngvacancy |eve|stosp|ke
wh||e South & Centra| Mumba| wh|ch
on|y oer products at the prem|um end
o res|dent|a| pr|ce band are exper|en-
c|ng h|ghest vacancy |eve|s.
vacancy |eve|s are as h|gh as 48%
or un|ts |aunched |n the 2 crore and
above pr|ce bracket v|s-a-v|s 37% or
the overa|| Mumba| market and the
MMP market has w|tnessed a steep
drop o a|most 40% |n pro|ect |aunches
|n FY 2012 compared to the prev|ous
per|od" the report sa|d.
Over 55,000 hous|ng un|ts were
|aunched |n 2011-2012, as compared
to the 92,000 un|ts |aunched |n the pre-
v|ous year. Supp|y was a|so constra|ned
dur|ng the year as deve|opers de|ayed
pro|ect |aunches |n the hopes o se|||ng
o ex|st|ng stocks to ease pressure on
pr|ces.
MountingDebt:
P|s|ng |nterest rates, soar|ng |nput
costs |nc|ud|ng |and, |abour and con-
struct|on mater|a| have ||m|ted deve-
|opers opt|on to cut pr|ces, accord|ng
to the study, as they were hard-pressed
to ma|nta|n the|r current operat|ng ma-
rg|ns o 30-35 per cent.
Deve|opers are hard pressed to
de|everage the|r pos|t|ons |n the Mumba|
res|dent|a| market as they are gett|ng
bur|ed under cont|nuous|y r|s|ng debts
w|ththemarket oer|ngthem||tt|eresp|te,
accord|ng to the Kn|ght Frank study.
The tota| debt pos|t|on o |ve ma|or
Mumba| based deve|opers adds up to
62 b||||on as on March 2012, wh||e they
are ho|d|ng on to a tota| unso|d |nven-
tory o approx|mate|y 143 b||||on, wh|ch
|s 14 % o the tota| Mumba| res|dent|a|
market.
ln the context o var|ous sources o
und|ng dry|ng up and new |aunches
h|tt|ng the market, the deve|opers may
re-p|an the|r pr|c|ng strategy |n such a
way that the unso|d |nventory |s mone-