According to a recent report from Jones Lang LaSalle, Mumbai appears to be facing a significant crisis, having invested Rs275 billion in land since the introduction of foreign direct investment in real estate back in 2005; however, the majority of these investments have not produced the expected returns. Even in South Bombay, once heralded as one of the most coveted and expensive property locales globally, several investments have not fared well. The report highlights the stark reality that Mumbai has committed Rs275 billion towards land, yet the reasons for this predicament are becoming obvious. Soaring prices have effectively discouraged potential buyers, with an average flat in Mumbai costing over Rs10,000 per square foot and numerous projects in Navi Mumbai, despite its less crowded nature, featuring flats priced upwards of Rs1 crore.
Compounding the situation is the confusion spawned by the new development control rules (DCR). Builders are now required to revise their plans to align with proposed changes regarding floor space index (FSI), leaving many ongoing projects in limbo. Consequently, numerous property launches have been delayed, causing construction to halt in various areas. For individuals who have already invested in such projects, the protracted stalemate means continued financial burden as they await resolution.
Contemplation weighs heavy on prospective buyers. Faced with an overwhelming amount of analyses and research reports about housing prices and their future trends, many remain more bewildered than informed. Consequently, a staggering 3.7 million flats are reported vacant across Maharashtra, with 479,000 located in Mumbai alone. The Census Directorate's data also indicates that even the Thane district is home to over 500,000 empty flats.
One commentator noted, “Why doesn’t the government or RBI (Reserve Bank of India) understand that the more they squeeze liquidity by raising interest rates, it raises returns on black investments even higher? If our country can eradicate black money from property dealings, rents will plummet, and property prices will decline.”
Home buyers are currently navigating a tumultuous landscape. Following a disappointing budget, a recent Crisil report warns of impending increases in steel and cement prices, which are likely to be transferred to consumers. Furthermore, proposals to raise leave-and-licence fees will lead to higher rental costs. Despite this, some industry observers maintain a glimmer of hope for improvement.
Pankaj Kapoor, MD of Liases Foras, shared similar sentiments. “The high prices are not solely the builders' fault. The recent stamp duty increase was excessive and demonstrates a short-term, revenue-driven perspective.”
Nevertheless, as many experts suggest, purchasing a home is a decision that can be made at any time. “You never know what will unfold next. Honestly, there's scant evidence to indicate that buyers have waited for more favorable home loan or pricing conditions before making their home purchase—ultimately, the need for housing is paramount. Therefore, if you're looking to buy a home, there truly is no bad time,” stated an analyst.