subject: Mumbai Homes Prices Are Likely To Remain Stable [print this page] As per CRISIL an integrated research company, home buyers may not find it cheaper to purchase residential property in Mumbai despite drop in sales as price are likely to remain steady due to sharp rise in construction costs and higher rates to fund the property in Mumbai.
Though the residential property in Mumbai the sales have dropped by 40% since last June 2011 the property price in the suburbs will remain steady but may see a decline of around 10% in some parts of Central Mumbai, around 7% in South Mumbai. As said by CRISIL the input costs that saw a 25% rise in 2012 will see another jump as it expects cement to go up by 5%, steel by 7-9% and labour charges increases by 10-15%.
Mr. Sudhir Nair head of CRISIL Research says in recent alteration in Development Control Regulations (DCR) will further increase costs for builders by 15%. Reason behind the new rules permit developers to buy additional FSI (floor space index) up to 35% of the current FSI by paying a fee calculated at 60% of the ready reckoner rate - the rate of which the stamp duty is levied.
In Mumbai land development governed by norms of DCR and the modified rules came into effect from January which have revised the method of calculating FSI. Spaces allocated for flower beds, terraces and balconies are now included in the FSI calculation. These spaces comprise of one-third of the built-up area even more for high-end residential apartments which will impact the total area available for sale.
Though enquiries remained strong but only few translated into actual sales since 2011 as said by CRISIL. The higher interest rates , inflationary pressure, slower economic growth and expectation of price correction led most buyers to defer buying decisions.
Year 2012, the latent demand likely to spur moderate 10% increase in new home sales, said Mr. Nair.
Mr. Pranay Vakil chairman of Knight Frank said, developers are borrowing at very high rates in anticipation of better sales and also hoping against hope that stock markets improve the situation changes and sales start happening again. Its easy for developers to raise rates, which they find difficult to drop it.
Real Estate sector is probably set to repeat its 2008 story of high prices and few buyers. The property experts believe the market is overheating again breaching the peak levels of 2008 as developers shows no sign of lowering prices despite poor sales.
