The high prices notwithstanding, prospective buyers are also holding back on account of high interest rates as well. All hopes of a rate cut have been belied as the central bank finds itself in a tough situation where its priority is tackling inflation.
Given this scenario, developers have usually taken recourse to attract buyers with freebies during the festival season. A recent report by Bank of Americal-Merrill Lynch showed that during the January-March period of this year, sales have picked up across major cities and particularly Mumbai primarily on account of new launches and discounts offered by developers.
"Historically, the second half of the financial year have been better than the first half as developers launch more projects, advertise more in run-up to Diwali and local new year such as Ugadi and Gudi Padwa," said Abhishek Kiran Gupta, research analyst and author of the report.
This is especially true of suburban areas where the demand is usually high with the average ticket sizes being low.
ND Mehta, a Mumbai-based property consultant says that the February-March period is usually a time when the real estate market in the city shows an upward trend across all segments, residential and commercial. This is mainly due to investment-depreciation benefits and EMI for the home loan. The income tax benefits matter to many, so it is usual to witness spur in deals before March 31 and then the registration in March or April. Developers also try to dispose piling inventories to meet their obligations with the banks or financial institutions or investors."
This is borne out by the fact that registrations have indeed gone up during this period even when the overall sales have shown a slump.
Even then, this year around, sales havent been up to the mark. Buyers were expecting good discounts and freebies but developers could not meet those expectations. Even the current Gudi Padawa did not mark significant offers or sales especially in the suburbs," says Ramesh Ranka, a broker in the suburban Khandivali-Borivali area, which has seen many launches in the lower-priced segments.
In the midst of all this gloom, one area has actually witnessed a growth in sales: the central part of the city, the Dadar-Parel-Worli area.
A report by brokerage firm Prabhudas Lilladher shows that sale deed registrations for the first five months have shown a robust growth and was led primarily by the city area. In addition, the huge slump the previous year gave it a low base which makes the numbers even more impressive.
This, the report says, is on account of a rise in the number of launches in the city as compared to the suburbs during the period under review. Another interesting facet is the year-on-year lease agreements have actually fallen in the city while sale deeds have gone up.
Launches, notwithstanding, the southern and central parts of Mumbai have shown the maximum fall in unsold inventory levels during 2012, according to the most recent report on the citys real estate by Knight Frank released in February 2013.
Now, these parts of the city are the upcoming premium residential and commercial destinations and for any developer who chooses to launch a project, land cost forms a significant component of the total cost. In August 2012, DLF sold 17 acres of land to Lodha Developers for Rs 2,725 crore. In 2011 Piramal Realty purchased mill land from Mafatlal Industries for Rs 605 crore.
What then explains the rapid offtake in inventory As the Kinght Frank report says, Prices have been moving in a narrow range in the past four quarters as the market slowly adjusts to the increasing launches. As prices in premium micro markets tend to be much more volatile compared to the suburbs, prices in some south and central Mumbai locations like Parel, Lower Parel and Mahalaxmi, have declined close to 10 per cent over the previous three quarters.
That is one possible explanation why those sale deeds numbers are up. With prices in these areas in the range of Rs 20,000-Rs 45,000 per sq ft, the offerings are bound to be in the premium segment. Developers in a bid to liquidate their higher priced inventory have been more open to negotiation in the premium segment, reducing prices substantially in favour of a sizeable up-front payment, says the Knight Frank report.
Which explains the rising sale deeds.