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Mumbai Residential Prices to remain sticky, time correction on the card

Thursday, October 01, 2015

In the Mumbai residential space, number of new launches have declined to the extent of 15-20%. Newer launches are happening at lower price (not a market correction). Developers negotiate price depending on the cash paid at the time of booking.

Size of apartments has gone down by 20-25% in Mumbai. A 670 sq ft flat is very common for 2bhk compared to 750qft carpet area two years ago. Mumbai will remain strong because developers have mastered the art of supplying just about the right amount of properties.

Cycle has bottomed out in the commercial space and it is poised to do better going forward . Pick up in demand of commercial real estate is true for all the cities as absorption of space has climbed up. Newer launches are more aligned to what the markets need now. Ticket size has gone down.

Developers are working with much lower margins, input cost has gone up due to high labour costs.

In retail real estate, market is guided by supply rather than demand. Absorption is a function of quality and quantity of supply. Only a few players per city in this segment. The malls which flopped or are on the verge of shutting down because they were ill-planned. Consolidation will probably happen across developers. Weak developers who have financing issues might sell their stock to large, well-off developers. Block deals can happen in real estate too, a builder will sell it to another strong builder.

Online has impacted the business, especially in electronics. People come to Croma, check the model and order it online. But there are some activities which online can not cater to such as Movies, Food, entertainment .

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