Market rates of residential properties in Colaba, Dadar, Santacruz, Vile Parle dip below ready reckoner rates as lakhs of houses remain unsold.
The realty sector in Mumbai is witnessing its worst slump ever, with market rates of properties in several areas, including south Mumbai, dipping below the ready reckoner rates.
Prominent developers and industry watchers told Mumbai Mirror that never in the history of the city have they witnessed such a phenomenon, even as debt-laden builders, struggling with slow sales, unsold apartments, and delayed/stalled projects, are pulling out all stops to attract buyers.
The real estate agents this newspaper spoke to said the market rates of residential properties in Colaba (Shahid Bhagat Singh Road) is around Rs 40,000 per sq ft, while the ready reckoner rates for the same properties is at least Rs 10,000 more. Similarly, the market rates of residential properties in Dadar West is around 30,000 per sq ft, whereas the ready reckoner rates in the area are pegged at Rs 40,000 to Rs 45,000 per sq ft. In parts of Powai, the current ready reckoner rate is Rs 27,000 per sq ft while flats are being offered for Rs 25,000 per sq ft or less.
“Since 2015 when the market was sluggish but wasn’t facing such complete slump, the ready reckoner rates have gone up by around Rs 2,000 to Rs 5,000 per sq ft in many parts of Mumbai, whereas the market prices have remained the same or worse, dropped by Rs 3,000 to Rs 4,000 per sq ft,” a real estate agent said.
Ready reckoner rates are values of properties, determined by the government for payment of stamp duty. These rates, published annually, impact the construction cost of projects, as several premiums and charges collected by the civic bodies and the government itself are linked to the ready reckoner values.
Sandeep Runwal of the Runwal Group, one of the biggest developers in the city, said this was the first time he was witnessing a scenario in Mumbai wherein the market rates of properties had dipped below the ready reckoner rates.
“This is indeed the first time that I have witnessed such a thing happening in Mumbai, and it has been going on for some time now. The property rates were on an upswing till about four years ago, but with demonetisation and GST and other taxes, prices are stagnant,” Runwal said.
The developer pointed out that the government has been increasing ready reckoner rates by around 15% per year, but the market prices have remained flat. “Ready reckoner has to be the true barometer of real estate prices; it cannot just be a revenue machine,” Runwal said, adding Santacruz, Vile Parle, large parts of Mumbai East, and Thane are witnessing prices of properties lower than ready reckoner rates.
Rajan Bandelkar, vice-president (West), National Real Estate Development Council (Naredco), an autonomous regulatory body affiliated to the Ministry of Housing and Urban Affairs, agreed there is a discrepancy between the market prices and the ready reckoner rates, saying the change has come about with the introduction of Real Estate Regulatory Authority (RERA), wherein the carpet area of a property has been defined. “Developers are now selling properties at carpet area. As a result, areas such as Colaba, Bandra, Santacruz, and Thane are witnessing higher ready reckoner rates compared to the actual market price,” Bandelkar said.
The body blow to the realty sector has been unsold properties. According to the industry estimates, more than 2.67 lakh residential properties in the Mumbai Metropolitan Region (MMR) remain unsold, of which 1.05 lakh are in Mumbai itself.
Samantak Das, chief economist and national director, Knight Frank India Ltd, said there is a slump in demand as well as supply. “With sales dropping drastically, developers aren’t eyeing new projects as their priority is to sell the existing properties that are piling up. We have entered a new regime of regulation and compliance process so there is need for a large-scale recalibration of the entire sector. Intuitively there is absolutely no movement in the market,” Das said.
One of the reasons behind this ‘lack of movement’ is the general sentiment that property prices will slump further. “For the realty sector, the festive season of 2017 was worse than last year’s. However, there are transactions in budget housing and mid-size units which is good for the long term,” Das said.
According to this year’s annual India Real Estate report by Knight Frank India, it will take at least two years for builders to find buyers for unsold projects, and the new project launches have dropped by 36% compared to last fiscal.
Bonanza for buyers
Some of the schemes offered by developers were unheard of in Mumbai’s real estate sector. For instance, Sai Estates, one of the big ticket developers in the city, is offering an entire apartment free of cost against the purchase of three flats of any size in its Kandivali project. The same developer is also offering one kg gold, while Sobha Developers is offering gold worth Rs 1.3 lakh in lieu of early bookings.
“Times are such that builders have to give more than just membership of a club to flat buyers. Large-scale properties are lying unsold and unless incentives are high, people are not going to buy as everyone seems to think prices will fall further,” a developer said.