It’s been a weak start to the year for the Mumbai real estate market with the number of property sales registered in India’s financial capital continuing to fall for the second consecutive month. The downtrend in sales volumes for the month of February is similar to that seen in January. Sales registrations at 4,716 are down 22% year-on-year and 7% month-on-month, according to a study by Prabhudas Lilladher, which points out that even after adjusting for the fewer days in February, the numbers would be more or less similar to those seen last month.
“The three-month moving average graph for sales registrations clearly illustrates a continuation of the downtrend,” the brokerage notes, adding that volumes for the lease segment continue to trend up, with the numbers coming in at 8,055, up 20% year-on-year. The continuous rise in the number of properties being leased is probably the result of prospective home buyers not being able to afford purchases after the sharp rise in property prices seen over the last one and a half years. It’s possible that prospective buyers are waiting for a correction.
Sales in Mumbai’s suburbs fell sharply, down 26% year-on-year in February, on the back of a 26% year-on-year drop in January. In contrast, sales in Mumbai city at 824 are up 13% year-on-year, albeit on the lower base of last year.
The brokerage notes that although February 2011 figures suggest a divergent trend, “a sharp slowdown is visible in both the city and suburbs, with volumes down 45% and 46% respectively compared to their peaks in 2010.”
Meanwhile, real estate analysts believe that although volumes were reasonably good at a pan-India level (ex-Mumbai), in the three months to December 2010, rising property prices and hardening mortgage rates combined with slowing investor demand will lead to volumes declining across most cities in the first half of 2011. “Volumes in Mumbai are down 50% below peak levels and we believe a similar trend ,though less acute, may play out in the National Capital Region (NCR) over the first half of calendar 2011,” notes a report from Edelweiss. The brokerage adds, “We have maintained a view of prices in Mumbai correcting by about 15% in 2011 on account of high prices and dampened buyer sentiment. In this regard, our channel checks indicate initial signs of prices softening in central Mumbai. However, we believe the correction of about 15% is limited to premium