Is the Mumbai realty market in revival mode?


Mumbai’s real estate market may be inching towards a steady revival according to experts. Experts feel that over the next few years, buyers here can expect a smaller number of real estate developers to operate in the market (biggies and quality players) and a steady increase in prices of property. They can also expect greater emphasis on construction quality and a more transparent buying mechanism. The real estate market has transformed in Mumbai between 2016 and 2017. This is due to the impact of haphazard and unorganized market growth, influx of several smaller and low quality realty players, increase in prices and avoidable business practices.

The major challenge for the real estate industry lies in the entire system itself. There are vague land and development laws, continually evolving regulations, government hurdles and several departments to take into account. Providers of funding such as leading banks and NBFCs and also the customers and investors are bound to expect returns (adjusted for risk) to quite some extent. However, in reality, hugely expensive capital is there for being deployed throughout asset classes in Mumbai’s real estate market with the exception of ready to move into property.

Expensive capital availability forces developers to integrate leverage ratios which are higher into their operational model, thereby increasing financial risks associated with projects. RERA has not changed the entire operating landscape in real estate but has only made developers more transparent and they will now think twice before taking any decisions which are unscrupulous or shady at best with their customers. RERA has legally bolstered systems for customer protection. Sales volumes have picked up after the introduction of RERA in the Mumbai real estate market and much of this is attributed to growing confidence of customers.

The market is expected to witness a major imbalance between total demand and supply of real estate. In spite of the huge inventory unsold at present, demand will always outstrip housing supply in the near future. There could also be greater transparency in the buying process driven by RERA which will make things slightly easier for the average buyer in Mumbai. The real estate developers will also choose more long-term capital options which come without strenuous debt servicing commitments.

Homebuyers in Mumbai can expect better prices with steady increases as the market revives. Prices, however are not expected to go up in the near future. They may begin increasing over the next few quarters according to experts. Capital costs have not really come down and there is still some ambiguity relating to swift government approvals. There is a stagnancy in terms of home prices and the market is still witnessing some unpredictability. However, sales volumes should continue their upward trajectory over the next couple of years. Slow and steady is the name of the game in the Mumbai real estate market at present.

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