Stubborn Mumbai Residential Price - Demand Affected

Residential prices in Mumbai continue to remain sticky.  Average prices are up by 49% since March 2010, which is higher than the national average increase of 41%, and are now 1.7X national average. We believe the price increase was on account of: (1) investor buying; (2) curtailed supply due to slower approval process

Sustained higher prices have led to lower affordability and consequently tepid demand. Volume absorption in March was lower by 25% yoy, while rolling 3-month average absorption has dropped by 15%. Recent absorption has fallen by 65% compared to peak level in Nov-2010. We estimate 15+% price correction is required in Mumbai to drive demand. 15% price correction along with lower interest rates/ marginal salary hike will improve affordability.

We have seen several developers offering structured schemes or reducing size of apartments (thus reducing ticket size) to boost sales. 20:80 subvention schemes are one of the most popular mechanisms to propel demand, in which the buyer has to make 20% upfront payment and balance after defined period/possession. Most developers are charging 2%- 3% higher prices on these schemes, but they offer customers an interest
savings of around 15% over a construction period of 3-4 years

Mumbai Property Prices + Rental Values

We would like to present the Property Prices in Various Parts of Mumbai Metro Region along with the Rentals as captured at the end of July-2011. The following Chart Shows the Same,

Mumbai - Mahim, Prabhadevi Worli Lower Mahalaxmi Mumbai Mazgaon Byculla Colaba Peddar Altamont Road Walkeshwar Malabar Napean SEa Road Wadala Sewri Sion

Navi Mumbai:
Palm Beach Road Kharghar Koparkhairane Panvel

Western Suburbs
Bandra Khar Santacruz Vile Parle Andheri Goregaon Malad Kandivali Borivali Dahisar
Mira Road

Central Suburbs:
Ghatkopar Kurla Mulund Bhandup Chembur Vikhroli

Thane:
Ghodbunder Road Panchpakhadi Eastern Expressway Teen Haath Naka Vasant Vihar.