The realty sector
is facing a problem of plenty — houses worth Rs1.5 lakh-crore have found no
takers in Mumbai and its metropolitan region. Blame it on steep prices and
According to real
estate agency Knight Frank’s latest research survey report, around 80,000
housing units comprising one, two and three BHKs, worth Rs1.5 lakh-crore — have
been unsold over the last year.
“The stagnation in
the real estate market today suggests a stalemate between buyers and
developers. It’s about who will blink first people are waiting for price
correction and developers are holding back as well. Besides, the current
financial market condition is not good. All of these have an effect on the sale
of property,” explains Dr Samantak Das, director of the research and advisory
service at Knight Frank
All of these
factors, adds Dr Das, resulted in a 35% decline in the sale of flats, and led
to a piling of unsold inventory.
As per the survey’s
report, only 45,000 units were absorbed in the last fiscal, which is much below
the market average of 70,000-80,000 housing units annually. Most of the unsold
flats were from south Mumbai, central Mumbai, the western suburbs, Navi Mumbai
Ideally, this dip
in sale should have resulted in price correction. “But, the delay in approving
projects saw to it that such a state of affairs continued,” says Das, adding
that in such a scenario, developers are reluctant to start new housing
“In 2011-12, 55,000
housing units were launched as against about 95,000 in 2010-11. Rising land and
input costs prevented developers from slashing prices despite a 35% drop in
sales. Developers are hard pressed to maintain the 30-35% operational, profit
margin,” explained Das.
however, pin their hopes on price correction. Several project approvals were
stymied last year due to several reasons, including the Adarsh housing scam,
the change of guard in the state and amendments to the development control
“Now, everything is
in place and the government has clarified that the projects will be approved
within the time frame. So, developers have started pursuing housing proposals
they had submitted. Several developers are also reeling under mounting debts.
They have to dispose of property to survive in the market. Therefore, the
prices may be corrected soon,” says Das.