First Half Of 2018 Mumbai & Delhi Residential Housing Market Remained Flat
A recent Knight Frank report says that the residential housing market in Mumbai remained absolutely flat in the first half of 2018, despite prices falling nearly 10% in this period. The city has more than 1.2 lakh unsold flats.
Some estimates suggest that it may take four years to clear Mumbai’s unsold housing inventory. In Delhi, this number is even higher, at 1.5 lakh units. And for the top seven Indian cities, there are now nearly half a million unsold flats. This is scary. Demonetisation, RERA and GST have been tossed around as reasons for a while now, but it is time to question whether a deeper anxiety affects the Indian real estate sector.
There are two types of home buyers in any market genuine purchasers who acquire for self-use; and investors who regard it as a proxy to a financial instrument. It is the latter that sparked the initial decline, post demonetisation, as access to black money became problematic. Yet, Indians are very ingenious at working around such constraints and cash is back in play, after a temporary hiccup. But the housing market is still dead. This is because returns have dried up.
That is only half the story. Even genuine home buyers have dwindled. The obvious reason is that prices are on a steady decline. Buyers aren’t foolish and they can see the pile of unsold houses and signs of desperation from sellers. Prices have corrected about 10-20% in most north Indian cities but people are prepared to play the waiting game. The reality is that total costs of properties in metro cities are still way too overpriced.
In Mumbai, the average cost of owning an apartment is eight times a family’s annual income. In Gurugram, it is five times. This is exorbitant. In comparison, southern cities like Hyderabad, Bengaluru and Chennai are far more affordable, a reason why the housing slump is far less pronounced there. In this game of blink between buyer and seller, the buyer has the upper hand now.
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