News & Updates

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 inflation.

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 and Thane.

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 projects.

“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.

Buyers can, 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 rules.

“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.