Mumbai Property Market Review – Post Elections 2019
It’s important that you take an informed decision before you decide to Buy, Sell and Lease a property. In the real estate market in Mumbai, there are numerous reports and discussions which give different viewpoints, and there is a lot of loose discussions around the post-election scenario where the market discussions are divided. Some say, that the markets will fall by 10 to 15% and there is an oversupply and some maintain that the markets will start getting stronger with time.
We bring you our independent analysis, which we have studied deeply researched and reviewed based on the Statistics available with us and in general the buyer and seller sentiment to bring you ground realities which will enable you to take an informed decision before you decide to Buy, Sell or Lease a property.
Past 5 Years – Taxes have been constantly changing/RERA
The past 5 years have been the years of constant changes in the real estate sector. The Service Tax, Vat was replaced by GST and when the GST was levied in 2017 it started with 12% and now the same has come down to 5% and the Stamp Duty has increased to 6% from the 5% in Mumbai with 1% being the Metro development additional tax. RERA is a great comforter to Home Buyers as legalities in a Building are clear to understand which is superb for the home buyer.
Capital Appreciation – Year 2005 – 2015 – Golden Period
If you look carefully, the max price increase started in the year 2005 and it went on till early 2014 and from there onwards the markets have been near stagnant in terms of Capital Appreciation. Past few years only a few projects and unique properties have seen capital appreciation. Increase in prices with subvention schemes is not a price appreciation, but for sure it creates a bench mark for the developer as he got the price.
Why there has been no major price increase post Year 2015?
The prices of real estate increased very swiftly from the year 2007 to 2015 leaving little head room for further price increase. The supply side increased post 2014 and the Demand side kept coming down due to pressure on prices.
Whatever Capital Appreciation happened between 2013 and 2015 was owing more to the Developers efforts in Marketing and New Developments and Unique Propositions and Financial Schemes and offering of Quality real estate with a life style quotient. (Oberoi Esquire, Oberoi Exquisite, Lodha The Park, Rustomjee Season, Elements, Paramount, Kalpataru Sparkle etc. are classic examples). It’s also seen, where there is a large complex of say 5 to 10 buildings with say 600 to 1500 flats, the pressure is on Sales due to the investors wanting to exit and developers exisiting inventory – Lodha New Cuffe Parade is a classic example of this.
What does the future hold in the next 3 years for Mumbai Property Market?
The upcoming 3 years are very interesting for the Mumbai Property Market. A few important points to consider:
1. Metro development work will be over by the years 2022/23 in most of the locations where there is an ongoing work.
2. Metro 2A and 7 which will add 2 more commuting lines between Dahisar and Andheri will strengthen the Infrastructure in Western Suburbs, making it the most sought after destination with ease of commuting. “Any property which is in walking distance to the Metro will do exceptionally well.”
3. Calibration of Mumbai property market will start happening from the years 2021 with certain areas going down (which are not close to Metro) and certain Buildings and not locations commanding premium due to the Metro connectivity. This calibration will happen when the Seepz to Colaba and the Andheri DN Nagar to Mankhurd lines will be nearing completion.
What should I do if I am holding properties as an Investor or if I want to buy a Property?
If you are holding properties and if you bought between the year 2005 and 2012 and if your property rates have already gone more than double or around it, then your lease rent returns are around 5 to 6% on the invested amount. You can choose to hold because you already sitting on appreciation and recurring rent income. If you looking to sell your current asset, you may have some Capital Gains and if you are investing again you have to pay Stamp Duty and GST etc. But if you are not reinvesting, it’s also an equally good idea to exit and re-plan your portfolio as this way you at least are en-cashing your capital gains and seeing the wealth in the bank.
If you are looking to buy a property for personal use, then this is a great time to buy as you are getting prices of the year 2015 and you can’t go wrong with the decision. Today, with money in hand, the negotiation power increases. Ensure that you are buying properties only with OC in hand.
Will prices fall down further in Mumbai in the next 2 to 3 years?
The prices of real estate may fall in locations where there is an oversupply from 2 sides, Investors exiting as they may have had no returns and Developer who has still unsold inventory and he is already reducing prices to sell and exit the project. This will happen surely and is already happening in a lot of Buildings and Not Locations. So it’s important to understand the Micro Markets and not just be judgemental on the entire market. Also due to Metro connectivity and calibration, people will start taking quick decisions to either be in a location/building or exit from a location.
Should I invest in Under Construction Projects anymore?
If you are investing with a Good Brand – like Mumbai’s top notch Developers where you don’t run a risk of Construction Delays, Plans changing, and timely delivery and may be with a financial scheme, then you can’t go wrong. Important thing to review here is that, you may not get Capital Appreciation in the immediate near future, but you can use the Formula or Earn, Save and Pay (ESP) to invest in an under construction property, where the pay-outs are typically around 20% to 25% a year. So if the property is for say 4 Cr, you are paying under Construction Linked Plan over 4 years and which is not a pressure on you. However, do not expect any great appreciation and if you are looking at a building which is 50 to 75% complete, then you need to review the total pay-out required vs. cost of acquisition vs. cost on possession less GST etc.
I am not able to sell my property for a while and I am incurring a loss on my Purchase value
If you are already not able to sell your property for a while, then, you need to immediately reduce your prices and align with market and please note that today’s buyer is loaded with options and is better that you reduce your prices and be done with it. It’s beneficial for you to do that in 2 ways, one being you will get 6 to 8% returns if you put the money in the Bank and recover some losses in a year and Second, if you are looking to buy a property and with money in hand you can get a better deal. This way you can close the ongoing buying and selling process.
Limited Launches from 2018 to 2019
Compared to the years 2016 and 2017 the launches of New Projects post RERA have been limited. The current inventory of the Supply side which is available in the market currently on sale is likely to be ready for possession and handover by 2025 and the absorption levels likely to be much better from 2021 onwards. So it’s important to have a look in the future as well.
If you are looking to Buy, Sell or Lease any property our experienced team will be glad to be of assistance and happy to engage in a call to discuss.
Sandeep Sadh – +919820030685 – firstname.lastname@example.org
CEO and Founder (Specialist with NRI Sales, Investments, Portfolio Management, Lifestyle Properties and Leasing both Commercial and Residential Properties)
Indu Sadh – +919819311244 – email@example.com
Director – Investments, Primary Homes, Investor Flats, Premium and Lifestyle Properties, Resale Flats and HNI and NRI Sales
Pooja Batra – +91 9819867813 – firstname.lastname@example.org
Director – Leasing Residential and Commercial Properties – Specialises in Mandate Properties, Rent Portfolio Management, Lease Advisory, Corporate Relations.
Disclaimer – The inputs herein above are personal views of the Author (Sandeep Sadh CEO Mumbai Property Exchange) based on his experience in general in the real estate market with 25 years’ experience in transacting.