IS MUMBAI A BUYER’S MARKET?

This is a question which has been asked way too often in the context of Mumbai's real estate market. RAVI SINHA analyses whether one of the most expensive markets in the world, has finally turned into a buyer's market     Mumbai's real estate segment has historically been red hot, something that is the aspiration of millions. The island city with less supply and more demand and the ever increasing migration, only meant that even if the market deviated from the conventional wisdom of economics in demand and supply dynamics, it still would be a sellers' market. The price index, demand-supply gap, inventory and all other indicators collectively lent credence to this school of thought. Moreover, the island city's realty continued to command the best premium, not just among the other metro cities of India but also in global ones.      However, today, there are strong indications of the city becoming a buyers' market. The question on everyone's mind is: what changed? Analysts believe that it is the over reliance of raw statistics that is misleading the outlook for Mumbai's property market. Fundamentally, there is nothing wrong with the segment; it is just the fact that the change of business strategy borne out of the global economic slowdown is changing the way the realty market has been operating in the city. This change is actually making Mumbai's real estate a more matured market.      To a large extent, the property segment seems to be tilted in favour of buyers. However, in reality, it is an equal opportunity market for both, the buyers and the sellers. Plain statistics reveal that the market has a ready inventory of 48 months; however, statistics never reveal the reason behind this inventory pile up. To say that affordability is an issue may be true but that has been the reality of the Mumbai market for ages now. After all, the city has the highest per capita income as well.      The answer lies in the fact that while the developers have entered into a joint-development model with the land owners, the focus is more on the execution rather than spending resources on the principal component of land and then waiting for the projects to start. Moreover, there are lesser new launches in recent times. This too highlights the fact that more importance is being given to the execution rather than the launch of new projects. Of course, the slowdown in the economy in general is making the sentiments bearish but that is also what is creating a very realistic market for the buyers as of now. Property seekers in the island city realise that the moment the macro-economic outlook is bullish, the prices that have hovered around the same level for almost a year now, will hit the sky once again. That answers the home buyers' query of whether it is the right time to buy a property in Mumbai.      Diipesh Bhagtani, executive director, Jaycee Homes, agrees that a lot has changed in the Mumbai realty segment and there have been a lot of changes in the government policies as well. New DCR rules have come up, a regulatory body is being established, FSI in south Mumbai for redevelopment of dilapidated buildings has gone up, the buying power has gone down and so on. Inflation too, has played a major role in the purchase decisions of high value commodities. Real estate, being one of them, has also been slow moving this year. "The prices have stabilised this year. There are a lot of value add-ons being offered by the developers according to their marketing strategies. All this is expected to change by 2014, with more clarity coming in from the government. I feel this is the right time to invest in a property, as the scenario will improve by next year," says Bhagtani.      According to a Cushman & Wakefield report on demand outstripping supply, Mumbai is expected to see the least imbalance in demand and supply, with the former outstripping the latter only by 5 per cent. The report elaborates that Mumbai is expected to witness an additional demand of approximately 2,25,000 units for the mid and high-end segment in the next 5 years, while the supply in these categories will be nearly 214,000 units. Of the total demand in these two segments, a majority will be seen in the mid-range housing segment, which will remain under-serviced. Overall though, Mumbai is expected to see large supply in 2014 and 2015, most of which will be in the high income group (HIG) category. The price points at which middle income group (MIG) projects have been launched are also higher than what end-users of MIG would like to pay.      Agreeing that property in Mumbai is increasingly turning in favour of the buyers, Manju Yagnik, vicechairperson of Nahar Group, says that the overall economic slowdown, higher interest rates on home loans, etc., are a few reasons that are restraining home buyers from taking the final decision these days. However, it should be considered as a temporary phenomenon. "We are sure that the Reserve Bank of India (RBI) and the government would take positive measures to bring optimism into the market in the days ahead. There is a lot of inventory with the developers, which they will open up. Buyers should avail this opportunity to strike a good deal. Once they have identified the property based on the amenities and infrastructure, they should undertake a market study of the location/area and then negotiate with the developer to get a good price. There cannot be a fixed method for negotiations as it will depend on the demand and supply in that particular area. Buyers today are aware about the markets as well as their needs; therefore, they would not fall for flattering offers and discounts but analyse in-depth before taking a decision," adds Yagnik.      Some call it a buyers' market while others prefer to call it an equal opportunity market; however, the fact remains that the macroeconomic indicators, coupled with the softening of the Mumbai property market, makes it an ideal time for buyers to invest in this segment. Analysts are unanimous that with the projected demand outstripping the supply, it may soon turn out to be red hot and the wishful thoughts of a substantial price correction in the city will then remain just that - a wish. Also, the festive spirit has led to many developers going the extra mile with offers, freebies and incentives. Collectively, this makes it the best time to invest in the Mumbai property market.      (The writer is CEO,      Track2Realty)