Flat sales take a beating in city Only 45,000 Units Sold In 2011-12

Mumbai:The city's real estate market has stagnated with only 45,000 apartments sold in the Mumbai Metropolitan Region (MMR) during 2011-12, well below the market average of 80,000 units annually. 

    A Knight Frank research report released on Thursday said the market has an unsold inventory of 80,000 flats valued at Rs 1.05 lakh crore. "Buyers have largely kept away from the market expecting an imminent drop in prices in the near future,'' it said. 
    Sales in the financial year 2012 dropped by more than 60% from its peak in 2007 and 35% from 2011. "This steep drop in absorption levels should have resulted in a similar correction in prices. However, a regulator imposed supply crunch through delay in approvals ensured that market equilibrium was maintained. Thus, an even greater fall in units launched effectively offset the impact of prices,'' said the report. 
    About 55,000 flats were launched in FY 2012, down almost 40% from the 92,000 units launched the previous year. "Supply was also constrained as developers actively delayed project launches and looking to liquidate current inventory before launching any fresh product to ease pressure on prices going forward,'' it said. 
    Increasing costs of land, labour and raw material also constrained developers from cutting prices as they were "already hard-pressed to maintain their current operating margins of 30%-35%''. 
    The largest demand is for flats costing up to Rs 75 lakh and 55% of units under construction are concentrated on northern fringes of the Mumbai market. Samantak Das, Knight Frank director-research & advisory services, said, "Core of the residential market is steadily shifting northward of MMR. People are prepared to move further away from the commercial business districts to find an apartment that fits their budget.'' 
    South and central Mumbai, which only offer premium apartments, are experiencing highest vacancy levels. Navi Mumbai, the peripheral western suburbs and Thane have seen a comparatively higher number of projects launched in the two previous quarters, causing vacancy levels to spike there too. The report observed that the investors' segment, which makes up 20% of demand, is offloading its real estate holdings. 
    "Vacancy levels are as high as 48% for units launched in the Rs 2 crore and above price bracket vis-à-vis 37% for the overall Mumbai market,'' it added. 
    The total debt position of five major Mumbai-based developers is about Rs 6,200 crore as on March 2012. "Developers are hard-pressed to deleverage their positions as they are getting buried under continuously mounting debts with the market offering little respite," said the report.