Saturday, November 08, 2008

Mumbai Property Update

Mumbai is witnessing a steep decline in property prices for the second time, the first being in Mid-90s.

According to Mr. Mufatraj Munot of Kalpataru, new projects are not viable, sales are slow and buyers are sitting on the fence. Every developer is looking at his own cash flow and many projects have slowed down. Even the once lucrative TDR (Transfer of Development Rights) market has lost its sheen. Till about 6-months ago, builders used to purchase slum TDR at Rs4,000/sq ft but now there are only a few takers although prices have come down to Rs1,200/sq ft. Moreover, builders who have bought TDR have been unable to pay sellers. It is estimated that about 100 builders owe close to Rs2bn to TDR owners and traders.

Oberoi Constructions is offering new projects in Goregaon East from Rs7,500/sq ft onwards as against Rs12,000/sq ft for ready flats. Lok Group too plans to offer discounts of 20% on new constructions in Malad and Khar. Last month Orbit Corp offered a 20% discount on bookings for a new project at Lower Parel but received a lukewarm response.

Home Loan Defaults on the Rise:
According to ARCIL [Asset Reconstruction Company India Ltd], between Apr-Sept-2008, 20% of the Loan Defaults occurred in the Home Loan Segment. Asset reconstruction companies expect a further jump in housing loan defaults in the coming quarters.

No comments: