The property market in Mumbai

Further significant price corrections are likely as investors withdraw.

8 April 2014, Words by Yolande Barnes

 

Mumbai is facing a huge oversupply of residential stock 
and the market has failed to absorb new projects launched in the city. Wider political and economic uncertainty has seen investors withdraw from the sector.

Developers have attempted to protect themselves by limiting new project launches and offering sales incentives, but the market is fundamentally swinging in the buyer’s favour. Affordability is poor, while yields are low in relation 
to government bonds, both indications of the potential for more downward price correction – particularly if rental growth fails to increase substantially.

The value of residential property in the SEU fell by 5% in H2 2013. The commercial markets have been impacted by the scaling back or withdrawal of some multi-national corporations. Office costs fell by 3.6%, bringing annual falls to 8.2%.

India’s economic growth has slowed drastically in the past few years. GDP growth of 4.5% was recorded in 2012-13, down from a peak of 10.5% in 2010.

General elections, due in May, are another factor contributing to uncertainty in the market. With GDP growth expected to improve modestly to 4.9% in 2013-14, medium to long-term prospects for Mumbai real estate may be positive, but not before a more significant price correction has occurred.

 
 

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