Weak absorption and rising inventories in the residential market here may lead to price correction in Mumbai in the early part of 2014, real estate consultancy firm Knight Frank said in a recent report.
Nearly 2.9 lakh residential units are under construction in the city while unsold units stood at 1.3 lakh during the January-September period, Knight Frank said in a report.
“The weakening real estate prices suggest that long- standing stalemate between buyers and builders is finally turning in the buyers’ favour. The increase in inventories coupled with weakening absorption levels would put further pressure on prices,” its research director Samantak Das said.
Mumbai’s unsold inventory level is almost 44 per cent in comparison to NCR’s which stands at 26 per cent even with twice the number of units under construction, the report said.
Owing to weakening demand, new launches in the city plummeted over 40 per cent compared to peak levels in 2010 as developers shift focus on liquidating current inventories.
As many as 47,488 residential units were launched during January-September.
“The residential market has been witnessing a steep decline in new launches as well as demand. Unsold inventory pressure in Mumbai is the highest among all other cities and is depicting a growing trend. We expect a more pronounced price correction which may drive the market to a better equilibrium,” he said.
The current environment will put pressure on prices in the medium term and the scenario is expected to last till the forthcoming general elections.
Further, the rise in interest cost and decline in net profit in 2013 will compel developers to lighten load and de-leverage their balance sheets.
“Major listed companies have defaulted their loans this year, which depicts significant stress levels on their balance sheets. Developers are now trying to salvage the situation by limiting fresh launches and boost sales by promotional activities to avoid reducing the base price.
“Overall, the right time for buyers to expect good deals in the market,” company’s national director Mudassir Zaidi said.
MUMBAI: Dilapidated buildings don’t tell when they will collapse, observed the Bombay high court on Wednesday while asking a section of residents of a building in Lower Parel why they have refused to vacate it.
A division bench of Justice V M Kanade and Justice M S Sonak heard a petition by Hare Krishna Builders alleging inaction by Maharashtra Housing and Area Development Authority (Mhada) to evict the non-cooperating tenants of a 90-year-old dilapidated building, which is likely to collapse. The petition said while 70 per cent tenants of Deen Building had vacated the premises, 39 tenants were not cooperating with the builder. The court had earlier directed Mhada to hear the developer and the non-cooperating tenants.
On Wednesday, Mhada advocate told the court that the hearing was complete and an order had been passed. But he sought time saying its joint chief officer of the repair board was not available. The 39 tenants intervened saying they wished to be heard in the matter. The judges questioned why they were not vacating the building. They also referred to the Kalwa building crash on November 18 saying it was a “fortunate” escape because of a vigilant resident. “All the tenants were saved because of an alert tenant who came home late. In such cases the building is not going to tell when it will collapse,” remarked Justice Kanade.
The court was informed by the advocate of the 39 tenants that the developer did not comply with condition of intimation of disapproval and did not construct the post office which was supposed to come up on the plot. “You are not worried about your life but of the post office,” said Justice Kanade. The judges said all issues would be examined in their entirety and adjourned the hearing to December 3.
MUMBAI: A 27-year-old woman, who allegedly duped a Mahim resident of Rs 24 lakh after promising to sell him an SRA flat two years ago, has been arrested. The accused, Maria D’souza, was produced before a court on Tuesday and was remanded in police custody till November 29.
The police said that the complainant, Browne Cardos (48) approached them recently after he realizing that D’souza had cheated him. The accused, a former call centre employee, lied that she would give him the possession of the flat in 2011. She was avoiding him for the past two years after receiving the money from him, said the police. Cardos filed a complaint at the Vakola police station last week after she refused to transfer the flat in his name. She reportedly showed him her inability to return the money stating that she had lent it to her relatives.
The police said that Cardos approached D’souza after learning that she wanted to sell an SRA flat at Vakola. She agreed to sell him it for Rs 28 lakh. The complainant paid her Rs 24 lakh in March, 2011 after she promised him that she would complete the flat transfer formalities soon and hand over him its possession. Soon, she started avoiding him under one pretext or another.
The police said that Cardos requested her to return his money stating that he no longer had trust in her. She was also avoiding his phone calls for last few months. The complainant was upset with the development and approached the police. The police learnt that the flat was registered in her father’s name and its work was not completed. Finally, D’souza was arrested on Monday.
The state government will challenge a High Court order that asked it to get rid of the norm of obtaining prior consent from residents for projects involving integrated development of slums into townships.
In its September 24 order, a division bench of Chief Justice Mohit Shah and Justice M S Sankelacha had asked the government to “make special provisions allowing the government to appoint a developer without such consent” for such projects. Existing redevelopment norms require the developer to obtain consent from 70 per cent slumdwellers before permission for construction is granted.
The state has decided to move Supreme Court in this regard. A senior government official said withdrawal of the consent norms would go against the spirit of the slum rehabilitation policy. It could also block land for a developer for long periods, he added.
A senior government official said the Slum Rehabilitation Authority (SRA) and the housing department were preparing grounds for challenging the court order.
The court had argued that the consent norm was only helping slum lords and was in no way beneficial to individual slumdwellers. “In the last 17 years, the SRA has allotted 1,524 slum redevelopment projects, but only 197 of these (less than 13 per cent) have been completed. It has been brought out that ascertaining eligibility and obtaining consent of slumdwellers is a herculean task. If a developer is required to ascertain the eligibility of slumdwellers for rehabilitation and obtain their consent for development, considerable time, energy and money is consumed in the process,” the court said.
The court’s observation were part of a 55-page judgement in a case pertaining to a project involving rehabilitation of about 7,000 slumdwellers and spread over 1.89 lakh sq m in Borla in Chembur.
The project, undertaken by Nilesh Modi-promoted Sterling Building Pvt Ltd, was given the go-ahead by former Chief Minister Ashok Chavan on November 11, 2010. After taking over the reins, CM Prithviraj Chavan revoked the permission.
The approval was given under the controversial section 3K (1) of the Maharashtra Slum Areas (Improvement, Clearance, and Redevelopment) Act, 1971, which grants discretionary powers to the government and SRA on matters including slum redevelopment schemes. The court had quashed the revocation order. The government will challenge the revocation, sources said.
The residential property market in Mumbai is turning in favour of buyers with inventory levels rising and prices weakening. Residential property prices in some south and central Mumbai locations such as Parel, Lower Parel and Mahalaxmi have declined nearly 10% over the previous three quarters with the increase in the number of unsold homes and prospective buyers reluctant to exceed budgets amid a slump, said property consultancy Knight Frank India.
Developers have been open to negotiation, especially in the premium segment, reducing prices up to 25% for a sizeable upfront payment. Prices in Navi Mumbai, Thane and the peripheral suburbs of central and western Mumbai have either been stable or have trended marginally upward, said the consultant.
“On the residential front, the rise in interest cost and decline in net profits during 2013 will compel developers to lighten inventory load and deleverage their balance sheets,” said Shishir Baijal, CMD, Knight Frank India. “Demand, however, is likely to remain subdued over the initial part of 2014 as the market continues to bottom out against the backdrop of a sluggish economy,” Baijal said. Approximately 47,488 units were launched in the January-September period, a sharp 28% drop from a year ago. The difference is even greater at 42% and 46%, when compared with the same period in 2011 and 2010, respectively.
It is quite evident that developers are keeping new launches in check in order to bridge the supply and demand gap,” said the report. Rising inventory levels have been a pressure point for realty developers across the country, especially in Mumbai, India’s most expensive property market. Nearly 290,000 residential units are under construction in the Mumbai residential market while unsold inventory levels are close to 130,000. “The fact that the unsold inventory level in the Mumbai Metropolitan Region is almost 45% while that in the National Capital Region (NCR) is 26% gives a perspective of the dire situation of the Mumbai residential market, considering that the NCR has nearly twice the number of units under construction compared to Mumbai,” the report said.
Unsold inventory constitutes units in ready as well as under-construction projects. For some time now, property brokers have highlighted delays in project deliveries with the economic slowdown eroding demand. The gap between prices of under-construction and ready apartments has widened to its highest and is as much as 100% in some instances due to delays and uncertainty in approvals, apart from other reasons.
Knight Frank India is of the view that the Mumbai office property market is bottoming out.
Mumbai-based realty developer, HDIL, had a Rs 12,043-crore inventory last financial year, while its net sales stood at Rs 1,025 crore, implying an inventory-to-sales ratio of 12:1.
HDIL is not alone; Mumbai’s residential market, the biggest in the country in value terms, is seeing an unusually high unsold inventory level. About 130,000 of the city’s 290,00 under-construction residential properties (45 per cent) are lying unsold due to weak demand and high prices, shows a report released by global property consultant Knight Frank on Tuesday.
Though the number of under-construction units in the National Capital Region (NCR) is twice that in Mumbai, the unsold inventory level in the former, at 26 per cent, is much lower. In Bangalore, the level at present is about 35 per cent. “This explains the dire situation of Mumbai’s residential market,” the consultant said. The stress is so much that Mumbai requires nearly nine quarters to clear its unsold inventory, while Bangalore and NCR need less than six quarters.
“We expect a more pronounced price correction in Mumbai which may drive the market to a better equilibrium,” said Samantak Das, Knight Frank’s chief economist & director (research).
The slowdown in real estate has also led companies like HDIL and Orbit Corporation to defaulting on loans taken earlier this year from non-banking financial companies, such as Indiabulls Housing Finance and LIC Housing Finance.
The Mumbai real estate markets’ stress has also led to decline in stock prices of listed players. So far this financial year, the shares of city-based HDIL, Orbit and Hubtown have fallen 57 per cent, 72 per cent and 34 per cent, respectively. The BSE Realty Index has declined 37 per cent during the period.
Most of the unsold inventory comprises apartments priced at Rs 2 crore and above — around 52 per cent of unsold homes are in this price bracket. Knight Frank said developers were open to negotiations, especially in the premium segment, reducing prices by up to 25 per cent for sizeable upfront payments.
Other consultants paint an even grimmer picture. Ashutosh Limaye, head of research at Jones Lang LaSalle, estimates unsold units in the Mumbai Metropolitan Region at 60 per cent of all under-construction and ready properties.
According to Pankaj Kapoor, chief executive of realty research firm Liases Foras, Mumbai has an inventory of over 150 million sq ft. “Mumbai needs 1.5 million homes, but the city can’t sell more than 40,000 flats a year due to high prices,” Kapoor says. Developers, it seems, are taking note of unsold inventories. The number of units launched in the city between January and September this year has come down by 28 per cent, on an year-on-year basis, to 47,500 units. The absorption of units during this period has fallen 26 per cent, according to Knight Frank.
Lalit Kumar Jain, president of Confederation of Real Estate Developers Association of India (Credai), however, said the unsold inventory was not very high, given that developers sold only 50 per cent of their inventory during the construction stage and 20 per cent during the completion stage.
But he admitted sales were down due to a negative sentiment. “Prices are higher than prospective buyers’ budgets and inflation and higher interest rates are also hurting buyers,” he said. Jain added the large number of investor transactions in Mumbai might not have been captured by unsold inventory data.
Meanwhile, a report released by HDFC Securities on Monday, said property registrations in Mumbai and its suburbs had seen a 19 per cent jump in October 2013 to 4,900 units. The increase was due to continued registrations of properties sold from 2010-11 to 2012-13, under revised development control rules, the report said.
At 35,948 so far this financial year, the number of registrations has been nine per cent more than 33,142 in the same period last year. This was led by 20 per cent year-on-year growth in Island City registrations; the growth rate in Mumbai suburbs was a muted six per cent, the report said.
“…We expect fresh sales/transaction volumes to remain tepid, as developers continue to hold prices in the face of deterioration in volumes,” said Adidev Chattopadhyay, analyst at HDFC Securities.
MUMBAI: Flawed planning, poor execution and the overwhelming task of rehabilitating the project-affected people have delayed several infrastructure projects in Mumbai, resulting in subsequent cost over-runs.
Many people feel that the time-overrun in projects can be prevented by scientific planning with the involvement of the citizen groups. Consumer activist A V Shenoy said, “There are basically two reasons for the delay in the relocation of project-affected persons (PAPs) and lack of approval before the commissioning of the project. All relevant permissions need to be in place much in advance so that lack of approvals do not hinder the progress of the project.”
A flawed model is also reason for non-execution of the project. RTI activist Anil Galgali said, “We have the example of the Trans-harbour corridor, where the state government failed to attract bids. The other is the case of the underground tunnel at Kalanagar. MMRDA now feels it may not get bidders as the imported technology will make the project unviable. Such factors need to be taken into consideration before planning a project.”
A senior bureaucrat also cited the lack of specialists in urban bodies like the MMRDA, CIDCO and BMC for the poor planning. The official said, “We have either engineers who have risen through the ranks, or appointees from the civil services, who may not have the insight of an expert.” He suggested that these bodies should have a sufficient number of urban planners who can realistically design a project so that it can be executed in the least possible time. He cited the example of the Santa Cruz-Chembur Link Road (SCLR), which has faced several issues related to PAPS, as well as faulty design as the Railways refused to approve the plan. He said all these could have been avoided if a specialist were handling the project.
A reputed consultant associated with many infrastructure projects said, “I feel that land is precious in Mumbai and people like to hold on to it by approaching the courts to prevent acquisition. This is one of the biggest reasons for delayed projects as unless right of way is given, the project can’t move ahead.”
He further said a project should only be executed if there is right of way. An MMRDA official said, “This is one of the reasons that the MMRDA is thinking of an underground Metro. It will prevent litigation arising out land acquisition and thus speed up the project.”
The delays are symptomatic of the way the public sector functions in India; the approach is casual, the planning is tardy and accountability is zero. One way of solving the problem is to levy prohibitive financial penalty on agencies and officials for the delay, which should be several times the cost overrun.
The plight of flat owners of Mumbai’s Campa Cola compound has clearly proved two things:
A. We need to be very vigilant before taking a final call while buying a flat.
B. India needs a regulator for realty sector sooner rather than later.
Even though they got some breather from the Supremem Court, the owners of illegal flats of Campa Cola compound will ultimately have to find alternate accommodation as the apex court made it clear that they won’t be able to avoid eviction and demolition. What is really shocking is that many of those who will lose their flats had, in fact, taken home loans from banks to buy the property. Banks approve loans only after due diligence and after being satisfied with the documents of the land and property. In this case several of the loans have been approved by nationalised banks like Punjab National Bank, Bank of Baroda, and private ones, including Citibank, ICICI, and HDFC etc. So, if you are among those who think that taking a bank loan will ensure that the property has a clear title deed as the bank will do the background check chore for you, then think again. Even after a bank sanctions a loan, your flat can turn out to be an illegal one.
It also goes without saying that Campa Cola residents are not entirely above blame. The 140 affected families claim that they had no clue that their floors were illegal. They may be right. But, expressing ignorance has not helped them in any manner. Many of them knew fully well that they were taking a risk by investing in these flats. Perhaps tempted by a good deal, these buyers overlooked the irregularities.
Given Mumbai’s skewed real estate market where a 476 sq ft MHADA flat costs ~55 lakh, one can just sympathise with desperate flat buyers, who naively or knowingly, invest in properties that aren’t entirely legal and then have faith that the same system that allowed the buildings to come up would also regularise them.
The builders of Campa Cola compound had, in the past, obtained permissions for constructing only five floors. But later, they constructed two high-rises and five buildings with extra floors. A total of 35 floors have been constructed without approval. The buildings were constructed between 1980 and 1989.
At the same time it is not easy to call residents really innocent or the ones who were taken for a ride as many of them knew that the flats were illegal. They knew the dubious legal status of the building but still bought them as prices were almost one-third of the prevailing market rate in the vicinity and they hoped to make a killing once the building was regularised. A resident of Campa Cola compound V. Srinivas told mediapersons that many buyers had got their documents checked by lawyers and had found title deeds, commencement certificate and the sanctioned plans in order. The big question is that who should one trust in such a scenario?
“The Campa Cola compound matter should be an eye-opener for all those who are planning to buy a home of their own. They must check the title deed of a property. The property title deed is the legal document which proves the ownership of property. The title deed presents certain rights and freedom to the person who holds it and such deeds are required where person wants to transfer his ownership,” suggests Sunder Khatri, a noted advocate.
There is also a feeling that given the inefficiency of municipal authorities in curbing such illegal practices, a real estate regulator is the need of the hour. In the absence of it, one would see more incidents like the Campa Cola compound one. “If a regulator was in place, then it would have stepped in before the situation got out of hand, analysed it and decided the course of action. What is really sad and shocking that even though every stakeholder of the realty sector is demanding for regulator, government is not taking any action,” said Sanjay Khanna, director, Kailash Nath Projects.
Experts say that all would be buyers of flats or property must ask for the latest tax receipts from owner of the property. “ That way you can check whether any notices or requisitions have been issued on the property or any tax is due. While you are checking property tax receipt, there are two columns in it. One is for owner’s name so verify it and other is for tax payer. In some cases, the tax receipt is not with owner,” says Mahesh Pawar, managing director of Mahavir Hanuman Group.
As the chances of fraud in property transactions are much more, you should do proper homework before sealing the deal. Let’s us talk about Deed/Sale Agreement. This is a very important instrument as far as property transaction is concerned. After agreement on payment of the property, it’s now the turn for advance payment and agreement between them. “You should know that the agreement is made on a stamp paper. It includes the final actual amount, advance payment, time limit to pay the due amount and how to pay it in instalments, time indication when the actual sale would take place. It also includes what would be done if the buyer or the seller defaults on any of the commitments. This ensures that the seller does not defer payments after finalising the deed and that he doesn’t sell to another party in the meanwhile. This agreement can be drafted by an expert lawyer and should be signed by both the parties with two witnesses,” informs Rajeev Chopra, CEO of ILD Developers..
It is important to remember that all property sales are illegal unless the transaction is by means of a duly stamped and registered sale deed. After collecting and checking all the documents, you have to register land/ property at the Sub-Registrar or the SDMs of your area.
According to one estimate around 6,000 buildings in Mumbai fall in the category of Campa Cola Compound. And as for Building Completion Certificate (BCC), the figure is even scarier. It is also said that 90 per cent of structures in Mumbai don’t have this vital certification. Keeping these facts in mind, you never know how many buildings in our cities are similar to the Campa Cola compound. Who knows the building where you are living in at present is also illegal.
“If a real estate regulator was in place, the builders of Worli apartments could not possibly have gone ahead with the illegal construction in the first place. It would have saved a lot of trauma and monetary loss to hundreds of people,” says Sameer Jasuja of PropEquity.
The problem of illegal buildings in Mumbai – and their impact on the existence of Mumbai’s citizens and organisations, as well as its real estate market – is not a recent phenomenon. In fact, it is as old as the Brihanmumbai Municipal Corporation (BMC) itself. Whether it is the result of corruption and collusion or lack of vigilance, the issue has always persisted in India’s financial capital – also the country’s most space-challenged city.
However, the issue of illegal buildings started intensifying from 1995 onward. This was when the BMC introduced a slew of new regulations pertaining to development control, floor space index (FSI) and transfer of development rights (TDR).
What followed was a significant increase in violations such as consumption of excessive FSI, buildings being built higher than permitted, flouting of CRZ and air space regulations, and projects being built without environmental clearances. Yet another common violation is the illegal utilisation of open spaces that must mandatorily be maintained around buildings.
Considering that the problem of illegal construction is rampant throughout Greater Mumbai as well as Thane, the Kalyan-Dombivali belt, and Ulhasnagar, it is impossible to define a focal point of highest incidence. What is certain is that the problem has been more or less kept under control in Navi Mumbai, where CIDCO enforces strict norms on such matters. The rest of the city seems to have been, and continues to be, wide open to the rampant spread of illegal constructions.
The fallout of illegal buildings or constructions on the city is severe. In the first place, residents of such buildings face the constant risk of disruption and displacement — as such these buildings are liable to be identified as illegal and consequently demolished without much notice.
Also, since illegal additional constructions are not part of the original approved building plans, the entire project is often rendered structurally unsound. Obviously, illegal buildings also represent a trap for investors who are unaware of the illegal status of the property.
Due to the huge shortage of FSI within Mumbai and its surroundings, illegal constructions are on an inexorable increase. When development clearances and increased FSI are not available, illegal buildings are, and will always be, an unfortunate but logical consequence in areas defined by huge demand for built-up spaces and no supply of new land parcels.
Also, the fact that obtaining all necessary permits to go ahead with the construction of a project is so tedious, expensive and time-consuming, is contributing a lot to the incidence of illegal buildings in Mumbai.
Though this is not always the case, property prices tend to be lower in illegally constructed buildings. In a city like Mumbai, where astronomically high property prices represent the greatest rift between people and homes, this factor plays a significant role in maintaining demand for any kind of available space. Since demand for lower-priced homes is so high, there is bound to be all kinds of supply, including the kind that does not pass the legal litmus test.
A building’s overall legality can be verified by the availability of an occupation certificate and original drawings approved by the BMC. However, it is beyond a layperson’s capacity to verify whether the offered space lies within the approved part of a project or is an illegal extension.
Mumbai is not alone when it comes to the plague of illegal structures – most other Indian cities have their share of problems as well. The notable exceptions are cities where development rules are more flexible and practical, or are enforced with greater strictness. Some of these cities are New Delhi, Hyderabad, Chandigarh and Bangalore.
Ahmedabad, which earlier had major issues with FSI violations, clamped down seriously after the earthquake in 2001 and completely overhauled its regulation process. As a result, the incidence of illegal construction in Ahmedabad has reduced considerably.
The Bombay High Court has allowed Bombay Dyeing to surrender to the Brihanmumbai Municipal Corporation (BMC) and Maharashtra Housing and Development Authority (MHADA) its land in Spring Mills Property at Wadala in lieu of its land in Lower Parel under the Integrated Development Scheme as provided under Development Control Rules (DCR). Both Wadala and Lower Parel localities are regarded as plum real estate areas and house a number of high rises. The court said Bombay Dyeing was within its rights to decide which of its properties in Wadala and Lower Parel it wanted to surrender to BMC and MHADA. Granting no relief to workers’ unions who argued that the mill cannot surrender land from its Spring Mills property in Wadala alone and retain more expensive textile mill property in Lower Parel for redevelopment, Chief Justice Mohit Shah and Justice MS Sanklecha allowed Bombay Dying to give up its land in Wadala in lieu of its land at Lower Parel. Bombay Dyeing will now surrender 66,651 sq metre land from its Wadala property.