Latest Property News on 'Mumbai'

Homebuyers expect 20% correction in property prices in Mumbai

Homebuyers are expecting at least 20% reduction in the prevailing property prices.

A survey conducted by real estate brokerage firm Groffr’s has revealed that home buyers are looking for huge discount —ranging from 30% to 40% in areas like Panvel, Kharghar, Kalyan, Dombivli, Titwala, Kandivli (east and west) and Mira Road.
The real estate brokerage firm had interviewed about 13,000 people. “Because of expansion and healthy absorption in these areas, well known developers have started jacking up the property prices. As a result, prices escalated creating wide gap between the market and the customers’ expectations,” said Sandeep Reddy, co-founder of Groffr.com.

Central and western suburbs have recorded an average of 13.1% and 15.7% difference between the actual market price and customers’ expectations, respectively.

Chembur recorded the lowest difference of 3% between customers’expectation and the actual market price.

“Any new supply is promptly absorbed and hence customers, who have traditionally stayed in Chembur, do not want to shift to any other location. They are not too fussy about discounts in case they find a quality project suiting their needs,” Reddy said.
Ignoring the buyers’ demand, developers again started increasing the property rates. In the last three months, property rates were increased by at least 10%.

Kalpataru Developer has increased prices for its Kalpataru Aura in Ghatkopar by10%, while in Kalpataru Gardens/Towers in Kandivli there was a rise of 20%. The Riverside project in Panvel has seen a rise of 7%.

Besides Kalpataru, Oberoi Realty, Lodha Developer, Wadhwa, Indiabull, Puranik Developer and Nirmal Lifestyle jacked up the prices.
Shailesh Puranik, managing director of the Puranik Developer, confirmed that they have increased the property rates by 5% to 10% to cover up the construction cost.

“The input cost has suddenly gone up in the last three months due to excise, VAT and service taxes. As a result, we have to pay more for buying cement, steel and tiles. We have to recover this increased cost from the buyers only,” he told DNA.

Real estate experts believe that Mumbai market is on a downward trend.

“A lot of developers in Mumbai today are openly negotiating if they think you are a genuine customer and are serious about buying. But they are not officially lowering the quoted prices. If the customer will not budge, then the rates will surely start falling down,” he said.

‘Increase minimum size of Mumbai plot from one acre to five’

Just when it was believed that the only direction the exorbitant realty prices could slide is downwards, property prices have inched up even further. The average cost of an apartment in Mumbai has just peaked to Rs 2.60 crore.
This is almost a 20 per cent jump from March 2011, according to figures compiled by the real estate research firm Liases Foras. The weighted average price of a new house within the municipal limits of Mumbai — from Colaba to Mulund, Dahisar and Mankhurd — was Rs 2.18 crore at the end of the previous financial year. In terms of per sq ft rates, the average cost last year was Rs 14,733 and as on March 2012, it has leaped to Rs 17,536 per sq ft.

A recent report by Knight Frank termed Mumbai as the least affordable of 63 cities worldwide, a conclusion arrived at after comparing the per capital annual income and the cost of a premium apartments in Mumbai. According to Pankaj Kapoor, CEO of Liases Foras, price correction, if any, has been very sporadic in a handful of projects.

A majority of projects offer concessional rates during the pre-sales, the initial stage when even basic building permissions are not in place. The risk element attached to these deals ensures that only investors get the benefit of such offers and when the project is finally launched for the end-users, it is priced at a higher market rate.

Kapoor said developers continue diverting the money received from investors into purchase of new land instead of using it for completing construction, despite restrictions by the Central Bank. “In the end, the investors are going to be stuck badly as the developers’ own equity in the project is very low. The projects will be delayed and developers will frustrate investors by blaming it on approval delays,” said Kapoor. He said the recent RBI measure to reduce the interest rates marginally will not lead to any spurt in sales and will only bring some respite to existing home loan-payers.

Overall in the Mumbai Metropolitan Region (MMR), comprising Mumbai, Thane, Navi Mumbai, Kalyan-Dombivli, Vasai-Virar and Mira Road-Bhayander, the average cost of a flat is still prohibitively high at Rs 1.12 crore. The unaffordable prices have ensured that there is a huge pile-up of inventory, with the number of unsold houses in Mumbai as high as 1.13 lakh units currently.

This translates into 129 million sq ft of unsold residential space, according to Liases Foras. The numbers have gone up to such an extent also because of the fact that after a prolonged lull, owing to uncertainly about building regulations, as many as 115 new projects were launched in the MMR in the first quarter of this month.

Average cost of Mumbai flat is Rs 2.6 cr

Just when it was believed that the only direction the exorbitant realty prices could slide is downwards, property prices have inched up even further. The average cost of an apartment in Mumbai has just peaked to Rs 2.60 crore.

This is almost a 20 per cent jump from March 2011, according to figures compiled by the real estate research firm Liases Foras. The weighted average price of a new house within the municipal limits of Mumbai — from Colaba to Mulund, Dahisar and Mankhurd — was Rs 2.18 crore at the end of the previous financial year. In terms of per sq ft rates, the average cost last year was Rs 14,733 and as on March 2012, it has leaped to Rs 17,536 per sq ft.

A recent report by Knight Frank termed Mumbai as the least affordable of 63 cities worldwide, a conclusion arrived at after comparing the per capital annual income and the cost of a premium apartments in Mumbai. According to Pankaj Kapoor, CEO of Liases Foras, price correction, if any, has been very sporadic in a handful of projects.

A majority of projects offer concessional rates during the pre-sales, the initial stage when even basic building permissions are not in place. The risk element attached to these deals ensures that only investors get the benefit of such offers and when the project is finally launched for the end-users, it is priced at a higher market rate.

Kapoor said developers continue diverting the money received from investors into purchase of new land instead of using it for completing construction, despite restrictions by the Central Bank. “In the end, the investors are going to be stuck badly as the developers’ own equity in the project is very low. The projects will be delayed and developers will frustrate investors by blaming it on approval delays,” said Kapoor. He said the recent RBI measure to reduce the interest rates marginally will not lead to any spurt in sales and will only bring some respite to existing home loan-payers.

Overall in the Mumbai Metropolitan Region (MMR), comprising Mumbai, Thane, Navi Mumbai, Kalyan-Dombivli, Vasai-Virar and Mira Road-Bhayander, the average cost of a flat is still prohibitively high at Rs 1.12 crore. The unaffordable prices have ensured that there is a huge pile-up of inventory, with the number of unsold houses in Mumbai as high as 1.13 lakh units currently.

This translates into 129 million sq ft of unsold residential space, according to Liases Foras. The numbers have gone up to such an extent also because of the fact that after a prolonged lull, owing to uncertainly about building regulations, as many as 115 new projects were launched in the MMR in the first quarter of this month.

‘Increase minimum size of Mumbai plot from one acre to five’

In a move that could signal a drop in cluster redevelopment proposals, Municipal Commissioner Subodh Kumar has proposed that the minimum size of plot for cluster redevelopment projects be increased from one acre to five. This effectively means that while a plot size to undertake cluster project is required to be minimum of 4,000 sq metre currently, the developers will now be able to undertake a project only if the plot measures a minimum of 20,000 sq metre, if the proposal is passed.
Activists and many within the municipal circles feel such a move is likely to result in better planning of projects in terms of urban infrastructure. The proposal, which comes close to the end of Kumar’s term, is aimed at a better planned cluster in terms of civic amenities, wide roads and pavements, more open spaces, cycling tracks, schools with playgrounds, art galleries, swimming pools etc, according to officials.

Kumar said, “I have sent a proposal to increase the minimum plot size for cluster projects to the state government last week. A decision is yet to come.”

“Cluster redevelopment should be big enough to enable widening of roads on its periphery and those within as well as retention of Development Plan reservations. This is not possible if the area is less than five acres,” stated his presentation.

While officials maintain that the new proposal will ensure much better planning and amenities for the residents, there is a concern that this model will now be preferred only by big ticket developers.

“The idea behind cluster redevelopment is to ensure that large chunks of land are used rather than scattered redevelopment throughout the city. But this might lead to a handful of big developers, who are in a position to execute large cluster projects, going forward with this development model,” said a civic official.

“Another challenge will be to club such mammoth plots as a large number of owners and tenants are involved. It takes time to convince each tenant,” said a developer of a proposed cluster redevelopment plan.

The state government has approved five cluster redevelopment projects (including the 14-acre Bhendi Bazaar) from over 50 proposals received so far.

Yet another suggestion is that the civic reservations of open spaces, including gardens, playgrounds, recreation grounds, libraries, schools and markets, be fully developed in cluster redevelopment projects. Earlier, developers would partially develop the reserved spaces citing lack of space as the minimum plot size was smaller. For example, while earlier only 60 per cent of a plot reserved for say a garden would be used for its intended purpose, allowing the rest for other uses, now it will be mandatory to use the full plot based on its reservation.

These suggestions are among a series of proposals by the municipal commissioner in the past few weeks. Kumar has recently proposed a policy that will enable sale of Transfer of Development Rights (TDR) component in the island city too.

MHADA lottery: Number of homes on sale dwindle

For lakhs of people, whose only hope of owning a house in Mumbai rested on the few thousand affordable flats released by the Maharashtra Housing and Area Development Authority (MHADA), this may come as a bit of a dampener. The board’s annual lottery this year will not only be delayed but the number of houses available in Mumbai is almost a fifth of what is put up for sale every year.
This year, there are only 775 new MHADA houses in Mumbai as against the 3,000-4,000 that are available every year. On Monday, MHADA’s Mumbai board was to start the process of releasing the application forms in the run-up to its annual draw of lots, which usually takes place in May. However, following a hurried meeting, the Mumbai board decided to postpone the process.

“The state government’s data centre Maha online was to have everything in place by April 10. We were to start our online application process on April 23 after a trial run once the software was installed. However, they kept delaying work first due to some trouble in getting customs’ clearance for the new servers and then due to insufficient manpower,” said Bhausaheb Dangade, Chief Officer of MHADA’s Mumbai board.

Dangade added that on Monday in a last-minute review, it was decided that MHADA should revoke the purchase order given to the state government agency and entrust the task to the same private agency that hosted the server for last year’s lottery. Officials said the application process will most likely begin next week, which means for the first time the draw of lots will be held as late as June.

The 775 flats in Mumbai are spread across Powai, Malvani in Malad, Prateeksha Nagar in Sion, Vinobha Bhave Nagar in Kurla, Gorai Road and Magathane in Borivli and Charkop in Kandivli. Of the lot, merely 92 are two-bedroom apartments for the high-income category, while 234 and 449 houses are meant for middle and low-income groups respectively. Moreover, unlike the norm so far, where the ready-for-possession houses are sold by MHADA, several of these flats are still under construction and will be ready only a year later. In addition to these houses in Mumbai, the Konkan Board of MHADA will be holding sale of 2,500-odd houses on Mira Road for the economically weaker sections and low-income category.

In comparison to the handful of houses available this year, in 2011 around 4,034 houses were sold in Mumbai with over 1.30 lakh applicants. The year before, 3.28 lakh people had applied for 3,449 houses on sale. The overwhelming response for the annual draw of lots is due to the fact the MHADA’s modest homes are usually priced reasonably at almost a fourth of the cost charged by private developers in Mumbai. However with MHADA’s once abundant land bank of 1,700 hectares shrinking to merely two hectares in Mumbai, the numbers are expected to dwindle further in the coming years.

Raymond to sell 9.4 acres in Thane for Rs 140 crore

MUMBAI: Textile major Raymond is in advanced talks to sell a large parcel of land in Thane, to a local developer. Sources familiar with the development told ET that the textile firm wants to sell around 9.4 acres out of the 125 acres it owns in the city.

The transaction could help the company raise as much as Rs 140 crore. The plot is close to the Mumbai-Nashik expressway and has reservation for a garden, school and a market.

But, a problem for the potential buyer could emerge in the form of slums, about 400 of them, as those living there will have to be provided alternative accommodation.

The developer can get incentive in the form of transferable development rights for the reservations and slum rehabilitation component. A Raymond spokesperson, however, was unavailable for comment.

Raymond had plans of either jointly developing the project or selling it after agreeing to an out-of-court settlement with its labour union which used to work in the textile located on the property.

On Friday, Raymond’s shares closed at Rs 413.7 on BSE, down 2.4% from Thursday’s close. The textile company owns 125 acres in Thane.

Despite incentives, barely 8% cessed buildings redeveloped

Merely eight per cent of the 16,000-odd cessed buildings in Mumbai have been redeveloped since 1999, when the state government decided to offer incentives to private developers in return for rehabilitating tenants of such properties free of cost.

The Mumbai Transformation Support Unit (MTSU), which has arrived at these figures as part of its year-long cessed buildings mapping exercise, has in its final report suggested that the government should axe the politically populist policy of free housing for tenants of cessed buildings. These are pre-1969 tenanted properties in the island city that pay a minimal repair cess to MHADA. The findings show that the policy has not benefited the four lakh families living in these buildings.

“If anything, developers have used every loophole in the law to maximise their profits. A majority of the redevelopment has been taken up on small plots less than 500 sq m with fewer tenants and only in lucrative areas. In many cases, even structurally sound buildings have been pulled down after forcibly evicting the tenants while the really dilapidated ones are left untouched,” said Sulakshana Mahajan, urban planner with MTSU, the state government advisory body.

Under Development Control Rules 33/7 (for single cessed structures) and 33/9 (for clusters of cessed buildings), the state government offers private developers an FSI of three and above depending on the number of tenants. The report shows that the policy has resulted in pencil thin buildings being constructed in dense locations with developers allegedly inflating the number of tenancies to avail of the extra FSI.

The report also looks at a few case studies of redevelopment projects to show the futility of the schemes so far. For instance, at Khetwadi it was found that the 473 tenants’ families were crammed together on half of a 4,000 sq m plot. The other half was used to construct a highrise for housing 35-odd families as part of the developer’s sale component. This kind of segregation was repeated in several other instances where all amenities such as open spaces, wide access and roads were found to be disproportionately allocated to the sale building while the distance between the rehabilitation buildings was less than five feet — not even wide enough for fire engines to enter.

Officials said all considerations of social justice have been subverted in the free housing concept so far. Once free housing is abolished, tenants will have to pay for the cost of construction and infrastructure. The report recommends that soft loans should be made available to the tenants for this purpose. However, in a suggestion that is bound to raise hackles in several quarters, the report also suggests curtailing the individual bargaining power of tenants to avoid redevelopment projects getting stuck in a gridlock. Instead, the decision to appoint developers should be taken either by MHADA or the owners of such properties, the report states.

The MTSU, which has carried out the study for MHADA, will soon be presenting its report titled Urban Renewal with Cluster Approach to the Chief Minister. The final outcome of the study would be earmarking the already identified clusters in BMC’s Development Plan (2014-34) along with the planned amenities and infrastructure. The existing rule of allowing plots of over one acre to go for cluster redevelopment could be revised to increase the cluster area to a minimum of 25 acres. “This way developers can’t come forward with proposals of reconstructing cessed building according to their choice in a piecemeal manner. They will have to take up a larger area as per the earmarked clusters and amenities,” said an MTSU official.

Bombay Dyeing will be asked to stop construction at Prabhadevi

Mumbai: Maharashtra government today said it would ask the Bombay Dyeing Mill in Mumbai’s Prabhadevi area to stop the construction of a commercial complex in the premises, and close the eight looms which are functioning.
Labour Minister Hassan Mushrif made the announcement in the Legislative Assembly during the Question Hour, in response to Leader of Opposition Eknath Khadse’s allegation that 63 labourers, who had not taken voluntary retirement, were shown to be employed on these eight looms.

“The company did not want to give 33 per cent of the mill land to the government,” Khadse said, adding that it was constructing a commercial complex on the land without requisite permissions.

Mushrif said the company would be asked to stop the construction work immediately.

As per the development control rules, owners of defunct textile mills can develop the land commercially only after ceding a certain portion to the government.

Niranjan Hiranandani to submit plans for low-cost homes

Mumbai: Real estate developer Niranjan Hiranandani will submit plans within two weeks to begin construction of affordable houses of 40 and 80sq m areas in his Powai township.

After the Supreme Court declined to dilute the February ruling of the Bombay high court or stay the order that banned him from undertaking any construction till he provides affordable housing, the developer was before the HC on Thursday.

His lawyers, senior counsel Aspi Chinoy, Dinyar Madon along with Parimal Shroff, showed maps to point out the open space position on which the developer would now build the houses.

His contention was that the court must take into account the 15% commercial construction permitted under DCR while calculating the area on which these tenements are to be constructed. He claimed he ought to build them on a reduced land size.

The bench headed by Chief Justice Mohit Shah asked the builder to first begin construction of the houses as directed. The court posted the matter to the third week of June for a progress report and did not consider the builder’s argument on commercial construction.

The HC, on February 22, passed its order which stopped the developer from going on with his lavish constructions. The judgment was on a PILfiled by activists who said that the developer had flouted a 1986 tripartite agreement with the state and MMRDA which allowed him to develop 230 acres in Powai and construct affordable houses and hand over partto the state.

The HC held that the developer flouted the agreement and the SC orally expressed its displeasure. “That place was meant for below middle class people. You built palaces for those who can afford Bentleys,” it said.

In 1986, the state passed an award determining the compensation at the rate of Re 1 per hectare for lands acquired from landholders. In return, the developer was to construct affordable flats.

The HC directed the Hiranandanis to construct 3,100 affordable houses (1,593 flats of 80 sq m and 1,511 flats of 40 sq m). Around 450 of these apartments, the court said, have to be offered to the state at a rate of Rs 135 per sq ft. Once these instructions have been complied with, the developer would have to take permission to embark on further construction.

RBI rate cut may not impact real estate prices: Experts

MUMBAI: Sale of flats in Mumbai will continue to remain sluggish even after the Reserve Bank of India on Tuesday reduced by 50 basis points its repo rate. “The interest cut won’t make homes affordable as property prices are already high and are unlikely to come down given the high input costs,” said a property consultant.

Developers say they have had to increase property prices by 5% to 10% as the cost of funds has increased along with input costs and other expenses. “If banks pass on the benefit of the interest rate cut to developers, then we may see a saving of Rs 5 crore on interest costs, but it is too small to have an impact,” a developer said.

After banks tightened credit to the real estate sector, developers were forced to borrow money from non-banking finance companies at 16-18% interest and from private equity funds at rates between 20 and 24%, say property experts. “The rate cut may not cause prices to come down in the near future,” Sandeep Reddy, chief executive of Groff, a realty portal, said.

Om Ahuja, chief executive ( residential services) of Jones Lang LaSalle India, a global property consultant said, “It is unlikely that property prices will come down because of the rate cut. It is likely that there will be an upward bias on property rates because of the anticipated improvement of buyer sentiment.”

According to NHB Residex, which tracks realty rates in key cities, flat prices in the city rose by 11.6% in October-December 2011, compared to the corresponding quarter of 2010.

“I think fence sitters will come into the market now,” said Lalit Kumar Jain, president of Confederation of Real Estate Developers Association of India (Credai).

“Sales may rise by 10 to 15% on a month-on-month basis and 20% cumulatively on a yearly basis. The realty sector is heavily dependent on non-banking finance firms. Till the liquidity situation improves and banks start lending, I don’t think prices will reduce,” Jain added.

“The increases in interest rates between March 2010 and October 2011 had kept many prospective buyers away,” he said. Moreover, due to high property prices and rising mortgage rates, the sale of residential and commercial properties fell by 15% in Mumbai during the January to March quarter this year, compared to a 9.1% fall in transactions in the corresponding period in 2011, say experts.

MCHI-CREDAI president Paras Gunecha said commercial banks should cut the interest rate so that home loans would become affordable.