Sales of residential property in Mumbai between January and September dipped 24% against the same period in 2010 as high prices and interest rates continue to deter buyers.
Lack of affordable homes is compelling buyers to postpone purchases as three out of four residences cost at least R75 lakh. Roughly 27% of such homes in the city have no takers, data released by Director General of Registrations, Mumbai, show.
?Transaction volumes have plummeted 70% since its 2007 heydays,? Knight Frank (India), a real estate consultant, said in a report released on November 25.
?We are unable to sell more flats,? says Paras Gundecha, president of the Maharashtra Chambers of Housing Industry, representing 1,200 developers. ?Land rates and construction costs are high and approvals are not happening. People are still deferring their purchase decisions in the hope of a price correction,? he added.
Property prices in the city are now 20% higher than in 2007, the Knight Frank report said. ?High interest rates, lack of funds to complete projects and delay in getting government approvals have slowed down transactions.?
Buyers are shying away from purchases as home loans have turned expensive with the rise in interest rates. The Reserve Bank of India hiked lending rates in October, the 13th such increase since March 2010. Interest rates on home loans have risen to anywhere between 11% and 11.25% now from 8.25% in March 2010. Higher rates means longer loan repayment tenure.
Delays in receiving approvals add to developers’ costs. Most of the unsold inventory is located on the outskirts of Mumbai, the report said. ?Almost 63% of the total unsold homes are in peripheral central suburbs.?
?The reason for the rising inventory is generally negative sentiment,? said Godrej Properties executive director Pirojsha Godrej.
To maintain cash flow, Godrej Properties has tweaked its partnership development business model to earn revenues as a development manager through designing, marketing and selling residential apartments.
Consultants say buyers prefer finished projects and not those that are on paper or under construction. This adds to the inventory of unsold under-construction apartments.
?Customers today are sceptical of buying properties in under-construction projects due to the uncertainty in project clearances, rising interest rates and high property prices,? said Ravi Ahuja, executive director (development services), realty consultant Cushman and Wakefield India. ?However, buyers might be willing to pay more for completed apartments that can be purchased outright,? he added.