Flats Worth over 1-lakh cr Unsold in Mumbai: Report

Residential property market in Mumbai has stagnated pushing unsold inventory in the city to 80,000 units valued at . 1,05,000 crore, as buyers have kept away from the market in anticipation of an imminent drop in prices in the near future, said a Knight Frank India report. 

Absorption numbers in 2011-12 are estimated to have dropped in Mumbai residential market by more than 60% from its 2007 heydays and 35% from 2010-11 to an estimated 45,000 units, showed the research conducted by the property consultant. 
The absorption level of 45,000 units in the Mumbai Metropolitan Region during 2011-12 is well below the market average of 70,000 to 80,000 units annually. South and central Mumbai, which only offer products at the premium end of the residential price band, are experiencing the highest vacancy levels, the report said. 
"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," said thereport. Around 55,000 units were launched in FY12, down almost 40% from the 92,000 units launched during 2010-11. Supply has also been constrained during 2011-2012 as developers have been actively delaying project launches and looking to liquidate current inventory before launching any fresh product, to ease pressure on prices. 
Developers are under pressure to deleverage their positions in the backdrop of continuously mounting debts with the market offering little respite. The total debt position of five major Mumbaibased developers stood at . 6,200 crore as on March 2012, while they are holding on to a total unsold inventory of . 14,300 crore --14% of the total MMR market. 
Knight Frank believes that a price correction in Mumbai residential market is warranted in the medium term. It expects the rise in interest costs for the realty sector by 37% from a year ago in 2011-12 and decline in net profits by 28% for the same period may compel developers to lighten their inventory load and deleverage their balance sheets.