The decline in property prices across Mumbai

Mumbai has always seen soaring property prices for many years. Call it the impact of Demonetisation or RERA, the recent land auctions in Navi Mumbai saw 40% lower bids as compared to November. The land auction was carried out by City and Industrial Development Corporation (CIDCO) and the bids ranged between Rs 65,250 and Rs 96,000 per sq m as compared to Rs 1.15 lakh – Rs 1.25 lakh in November. With the implementation of RERA, and the limited developers’ ability to buy land with advance payment from the customers has caused a decline in the Land prices across the Mumbai Metropolitan Region. A 40% decline in the property prices across Mumbai is seen as a huge fall as compared to the prevailing prices in the market. 

Currently, CIDCO is selling 6000 sq m worth of land which includes six commercial plots and residential plots in New Panvel.  The developers are required to make payments through cheques, there is no likelihood of the demonetization driven plunge in the bids. RERA, is considered to be the primary reason for the low bids. It is expected that the sector will see this lull period for another six months due to the impact RERA and demonetization. It is expected that there will be a minor improvement in the buyer sentiment in the second half of 2017, as the impact of RERA will begin to play out in the market.

The Country witnessed an overall decline of 16% in the first quarter for the launch of residential units. The trend indicates that the launches have seen a steady quarter on quarter decline in the last four quarters, post the announcement of RERA. The launches across the residential sector has declined by 8% from April 2016 to March 2017 as compared to the same period in the previous year. Similarly, the new launches declined by half in Delhi and NCR, Kolkata saw a decline of 29% and Bengaluru by 24%.

There will be no significant momentum in the launches across the cities for the next 2-3 quarters since the developers are realigning the marketing strategies for the implementation of RERA. Currently, the developers are focusing on the sales of the inventory across different cities. Once the inventory is cleared, they will be able to plan and launch new schemes for residential as well as commercial. The impact of RERA will be long term and it will be interesting to see how the multiple effect of demonetization and RERA leaves the real estate sector across the Nation.