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Mumbai Property Market - Is it too Hot to Handle!!!
Mumbai Property Market - Is it too Hot to Handle!!!

Analysis of Mumbai Property Market

 Analysis of Mumbai Property Market

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Micro and Macro

(Numerous Micro and Macro factors in the market today have to lead to the present day situation in Mumbai in 2013)

The stock market downturn after a continued bull phase seems to have finally impacted the real estate market and it once again confirms the deep relation of the two markets which complement each other most of the times in thick and thin.

However, in the present day situation, there are Macro and Micro factors and it is imperative to understand, relate and then act accordingly to understand what is happening around in the market. Higher Interest Rates, Double Digit Inflation topped up with a bit of a political un-stability on the horizon has also lead to the financial and liquidity crunch and these can be considered as Macro factors for the current phase.

Now, let us go back a few years and look at the entire real estate story, the past 3 years have been the best ever for real estate, this was also possible because the stock markets were booming, there was industrial growth all across and with political stability there was definitely a vision and of course the infrastructure development, launches of lot of projects by a lot of top developers across locations and other factors added to the glory of it. People had disposable incomes because of the stock markets (read: unconventional income) apart from their regular incomes out of the overall booming businesses to invest in real estate and create an asset and the pricing was looking attractive and the outlook was promising to the extent of the fact that people could see their money and investments yielding returns both from capital appreciation/lease rent returns in a short span.

Take the case now, we have the opposite happening and I am sure you are witness to the stock markets state of affairs today. There is a cloud of political un-stability, financial markets are down, people have nearly lost their profits and their principal amounts invested are looking to be at stake now. Owing to all this, there is a little bit of a slowdown in the economy and a lot of small and big fear varied factors have tamed the mindset of people and turned them conservative. The increased burden of EMI which was 7% in The year 2004 – 5 now becomes 11% plus and it is a big deterrent to a lot of home buyers as they have to look at their monthly budgets today a little bit more seriously before they commit to the property purchase.

The valuations of property prices which were looking strong have started looking a little bleak because of the fact that they had actually grown too big owing to a rapid fire round of price inflations across and suddenly in all this the unaffordability has kicked in. This means, only the people who have money or the need to buy a home will be the buyers in the property market. Each location has reached its peak in terms of property prices and now it seems to a few people that there is definitely a margin to reduce as the locations and properties do not value so much once you look at the ground realities. All these factors coupled together can be termed as Micro Factors as well.

The market as on date is not majorly impacted but at the same time, the general feeling which has been witnessed is that people are waiting and watching and may grab a deal which makes sense to them financially. Also, if you look at the future prospects it is become a bit unpredictable and hence the inevitable slow down will be haunting the market for a while. This also means more and more waiting and watching and in turn, stagnation may be round the corner.

Monsoons are generally a slow period, but let us look at the micro picture and ground realities a bit deeply. Mentioned below are a few categories of buyers in the market, with the categorisation of buyers we see that the demand may be existing but it is very different and scattered across various segments and the market should also offer products to sell in the same segment, and only if the parameters of both the buyers and sellers match then things can move else, the slowdown will remain eminent. It should also be noted that a lot of people have already bought homes and they are the executives working for MNC’s, Corporates, Banks Companies etc. and a lot of business families have also invested already in a small and big manner. The very fact that buyers are finding the properties unaffordable means that the cycle will slow down and hence the Micro Factors will play a big role in coming months.

Buyer Categories

Overview

Analysis/Deterrents

Actual users (NRI’s and HNI’s)

These 2 Categories are probably the only buyers left out today in the market as they have the money to still be deployed as they have invested a few years back and are yielding lease rent returns etc, and can afford to stay afloat and still on the look out for premium apartments.

(Analysis – Slow and Selective Demand, gets crippled at times when they do not get transparency in the transaction)

Property Investor

The Property investors have disappeared for a while, they do not think it is worth investing to get in at this stage and in any case, there are not many projects left out, which will give them enough Capital Appreciation and good lease rental returns and a lot of them cannot even recycle because they will have to pay Capital Gains on their initial investment etc. So they are sitting quietly as of now, In fact, they are the best people to learn from as they have a deep sense of the actual experience of the returns which is both on paper and tangible.

((Analysis – Weak Outlook, low returns, shortage of new projects, builders asking for large amounts upfront while the possession is 3 years away)

Re-investment due to Capital Gains

These are forced buyers who are always in the market scouting around for a suitable match for their investments which may either be a distress sale which promises a future capital appreciation and lease rental returns, most investors today look at the combination of both these factors.

Analysis – Very Slow and Selective Demand/ Limited availability of Capital Gain bonds

Upgrade Buyer

This category buyer is an evergreen component of the market and is always present in the market year on year as the back to back deal is not very easy to transact and the quest is always on for that dream home

Analysis – Extremely Slow and very selective demand (Extremely cumbersome as it is a double deal and to match all the parameters and synchronise it becomes a bit tough for the non-seasoned)

First Home Buyers

Year 2004 through 2007 experienced the maximum activity in this segment and as per an estimate around 40000 families in the Mumbai region itself jumped into owning their first homes with maximum loan components, the first home buyers generally like to book in an under construction and pay the entire price over a period of time)

Analysis – Ongoing demand but in select locations and projects. The prices in most locations are all time high and most people are unable to afford the current day prices and they are watching and looking forward to some kind of respite in the short span.

 

 

Source – Sandeep Sadh CEO Mumbai Property Exchange

About Sandeep Sadh

Mumbai Property Exchange is promoted by Mr.Sandeep Sadh who has been in the real estate business since the year 1993 and has an experience in transacting in Residential Lease & Sale, Commercial Lease & Sale. The experience of transacting and having a practical approach at work in each segments of real estate has given Mumbai Property Exchange an edge over its competition.

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