Once again Mumbai has emerged as the most expensive place to buy property as more than 29 percent of the city's total under construction project have surpassed the Rs 1 crore mark against 11 percent and 5 percent in the National Capital Region and Bangalore, respectively, according to a new report by real estate consultancy firm Knight Frank.
This incessant rise in property prices and the builders' obsession to concentrate only on premium projects over Rs 1 crore even in new launches, has limited the purchasing ability of home buyers. This has not only resulted in a fall in absorption but is also pushing people towards the rental market or to far-flung suburbs outside Mumbai.
Since land in Mumbai is land-locked from one side due to the sea, the weighted average price in Mumbai city is around Rs 14,400/square foot while cities like Bengaluru, Pune and Hyderabad have a relatively lower weighted average price of Rs 3,660/sq ft, Rs 4,100/sq ft and Rs 3,450/sq ft, according to the report.
However, if Mumbai's far-flung suburbs such as Thane, Navi Mumbai, Mira-Bhayandar and Vasai-Virar are to be included, the average price falls to Rs 5,900 square feet, still higher than other cities.
Prices in the NCR too are relatively higher at Rs 4,750/ square foot, higher despite land availability in its periphery like Noida, Greater Noida, Ghaziabad and Faridabad because of the relatively higher prices prevalent in Gurgaon which still accounts for a majority of the new launches within NCR
Check out the the average price trends from 2008 to June 2013 in the chart below:
Bengaluru, however, continues to remain the most affordable residential market since 77 percent if its total under construction projects are below the Rs 50 lakh mark as developers lure buyers with smaller-sized apartments in peripheral areas.
This is followed by Chennai at 75 percent. But, surprisingly, Hyderabad has only 51% of its total under construction units below Rs 50 lakh despite the city having the lowest weighted average price among the top six cities as most houses are skewed towards larger-sized apartments.
In Mumbai, only 48 percent of the city's projects are below Rs 50 lakh, the lowest among the top six cities shown in the graph above.
Mumbai's struggle with buyers is evident from the fact that it will take at least seven more quarters (almost two years) to exhaust its existing unsold flats. In 2011, it stood at five quarters. Clearly, no one is buying this real estate boom in Mumbai.
But has this resulted in a price drop?
Not yet. Prices continue to remain high. Instead builders are offering discounts to investors who are willing to make an upfront payment but end users continue to stay away.