MUMBAI REALTY REBOUND.

Mumbai, the financial capital of the country, has always been the hotspot for real estate development. However, the city's realty development has also closely witnessed all the highs and lows.Prajakta Karnik takes a peek into the growth story of the “Maximum City”.

Real estate industry has been on a bumpy ride since the past few years mainly due to the various policy decisions taken by the government to regularize the sector. The recent Covid-19 pandemic had come as a major setback to the real estate market across the country, but the impact on Mumbai's real estate was significant. Construction activities had come to a standstill due to the pandemic-induced lockdown and severe shortage of labourers, who migrated to their villages in fear of the spread of the deadly coronavirus.

However, as businesses and economic activities resumed, and labourers started coming back to work, there have been positive developments in the real estate sector in Mumbai.

Realty Bounce Back

With the construction and economic activities resuming, the demand for housing also picked up. This was largely on the back of various policy decisions taken including the slashing of repo rates by the Reserve Bank of India (RBI) and stamp duty reduction announced by the Maharashtra government and tax incentives.

The state government had announced a 3% reduction in stamp duty from 5% from September 1, 2020 till December 31, 2021 and by 2% from January 1, 2021 till March 31, 2021. Currently, the home loan rates hover around 7% which was made possible through a significant reduction in repo rates by the RBI since February 2019.

Owing to these, the sales momentum in Mumbai has picked up. According to property consultant Knight Frank India, Mumbai recorded a historic surge in registrations in March 2021 alone, driven by home sales in the last month of the lower stamp duty window.

“The reduction in stamp duty rate has helped mitigate the pain in the long-beleaguered real estate sector of Mumbai. As expected, with the revival of the economy, the sales momentum grew stronger in Q1 2021 and the euphoria amongst homebuyers continued despite the 100-bps increase in stamp duty rates. A combination of lowest home loan rates, reduced house prices along with rebates and payment flexibility offered by developers, as well as increased household saving rates, have provided the right growth environment for the residential segment to grow,” Shishir Baijal, Chairman & Managing Director, Knight Frank India said.

The reduction in stamp duty has created beeline for purchase of homes outside registration offices with Mumbai witnessing historically strong sales. Homes sales have continuously risen month on month in each window. Between the period from September 01, 2020 and March 24, 2021, Mumbai recorded registration of 75,688 units with numbers growing incrementally month-on-month, the agency suggested.

A report by Anarock Property Consultants stated that around 20,350 units were sold in MMR between January-March 2021, of which 68% or around13,750 units were sold in Mumbai, 18% or nearly 3,650 units in Navi Mumbai and 14% or 2,950 units in Thane.

“Mumbai is one of the most expensive real estate markets in the world. A reduction in overall acquisition cost by anything between 5-15% made a huge difference in buyer sentiments. Low home loan interest rates and developer discounts, and timely intervention of the government by ways of stamp duty reductions and a 50% cut in premium charges also helped the region get its mojo back even during COVID-19,” says Anuj Puri, Chairman, Anarock Property Consultants.

With MMR sales rising by 46% annually, the demand for real estate in Mumbai has been higher compared to other markets with highest yearly reduction in unsold inventory of 8%. According to the Anarock report, Mumbai reported 41% change in terms of unit supplies in January-March quarter as compared to Q1 of 2020.

According to Niranjan Hiranandani, Managing Director, Hiranandani Group of Companies the demand for homes hasbeen on uptick on grounds of safety, security andstability it offered during Covid crisis. “Additionally, the fiscal impetus and booster dose by thegovernment and regulatory bodies have played acatalytic role in augmenting the home demand,” he added.

Ashok Mohanani, President, NAREDCO, Maharashtra said the industry body had urged the Maharashtra government to extend the reduced 3% stamp duty charges for another year till March 2022, so that we could continue to encourage the homebuyers to invest in their dream homes.

Infra Boost Drives Demand

Being the financial capital of the country, Mumbai has emerged as the preferred destination not only for real estate but also for infrastructure development. A large number of infrastructure projects have been proposed and many are already under various stages of construction and implementation. These projects are aimed at improving connectivity and reducing congestion.

Some of the key infra projects are Bandra-Worli Sea Link, Santacruz-Chembur Link Road, Eastern Freeway, the Coastal Road, Mumbai Trans Harbour Link Road as well as the 337 km of Mumbai metro corridor.

“The infrastructure developments have enhanced connectivity from the central suburbs to other locations such as Navi Mumbai, Thane, south Mumbai along with the western suburbs. The presence of top-notch brands, hotels, malls and restaurants have provided the home buyers with access to a vibrant lifestyle. These factors have transformed the area into a great mix of convenience and leisure making it an ideal destination for those looking to be a part of the buzz, yet have the privilege of green tranquil surroundings,” says Rajat Rastogi, Executive Director, Runwal Group.

According to Gaurav Sawhney, COO, Piramal Realty, most of the evolving suburbs in Mumbai are currently witnessing projects that are designed to suit the budgets of end consumers and are well connected in terms of social and physical infrastructures. “We expect this momentum in sales to continue through the year. These suburbs offer superior infrastructure, excellent connectivity, access to healthcare facilities, educational institutions and entertainment facilities that position them as ideal destinations for residential housing. With improving connectivity betweenthe business districts and peripheral areas, considerably reducing transit time, there is a potential for markets like Thane, Navi-Mumbai, Kalyan-Dombivali belt, making them established real estate destinations within the city.”

Moderate Prices

Improving affordability and market share gain for large organized developers are structural positives for Mumbai's real estate. According to Emkay Global Financial Services, average housing prices have stagnated since FY17, interest rates are at an all-time low and the apartment size has been shrinking. “Due to this, we estimate that for a typical house in Mumbai, EMI/Income ratio has declined by 40-60% over FY14- 21,” it said. The average property price in MMR towards 2020-end was Rs10,610 per sqft.

According to Pritam Chivukula, Co-Founder and Director, Tridhaatu Realty, property prices have remained stagnant over the last 3-4 years. “We feel with the delivery cycle improving coupled with lower home loan rates and the need for a better lifestyle will lead to a decent growth pattern. We are already witnessing this for the last 2 quarters, and it looks to continue at the same velocity for the next 4-6 quarters.”

Office Space Absorption & Flexible Workspaces

Despite large workforces still working from home, office space absorption across India's six major cities is expected to touch 41.3 million sqft in 2021 marking a growth of 22% from last year. Mumbai is likely to post highest year-on-year growth in leasing activity from 2.9 million sqft in 2020 to 5.5million sqft in 2021, according to Savills India's recent report titled - India Market Watch Office 2020.

“We expect the office real estate market to improve in 2021 as it continues to attract interest from occupiers as well as investors, despite the disruption caused in 2020. Boosted by positive government reforms and improvement in economic activity, we are certain that office space absorption will pick up soon. Several corporate occupiers have revived their expansion plans as more and more people start returning to offices and business starts to pick up,” said Anurag Mathur, CEO, Savills India.

Mumbai could see an increase of about 85-90% in office leasing as recovery is anticipated in the latter part of 2021. BFSI and technology occupiers are likely to drive the office demand. Savills India expects rentals to be largely stable across most micro-markets.

way forward

In the wake of Covid-19, there has been a sharp growth in demand for large homes that can accommodate workspace; and also there is an increased preference for ready-to-move-in homes. Growing preference is also for homes in integrated township projects, which are built to be self-sustaining ecosystem equipped to meet all major needs of its residents. The affordable and mid-income housing segment, in particular has witnessed robust growth. Mumbai's real estate universe is expected to expand sizably in the coming year as new as set classes.

As Ankit Goel, Director, Goel Ganga Developments sums up, “Now, after the Covid-19 pandemic hit us, and work-from-home became a new normal, people realised the importance of a surplus or additional room so that their office work doesn't face any roadblock. Keeping this work-from-home culture in mind, now potential homebuyers, while doing market research before they actually buy the property, are focusing on 2BHK plus study or 3 BHK flats. And, these kinds of flats mostly falls under mid-segment housing. Therefore, as one of the silver linings of Covid-19, mid-segment has got a boost.”

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