A recent survey indicates that the residential market in Mumbai might experience price corrections in early 2014. This is attributed to the combination of low absorption rates and a surge in unsold inventory. Currently, about 3.2 lakh residential apartments are under development in Mumbai, with 1.8 lakh units remaining unsold during the first half of the current fiscal year. This signifies a shift in the real estate market dynamics, potentially favoring buyers after a prolonged period of stalemate with developers.
The increasing inventory and weakening absorption rates are expected to further impact apartment prices. Mumbai's unsold inventory represents nearly 46% of the total units, significantly higher than the Delhi-NCR region's 28%, despite the latter having double the number of units under development nationally. Due to sluggish demand, new launches in Mumbai have plummeted by over 45% since their peak in 2010, as developers prioritize selling existing inventory.
The residential market in Mumbai has been experiencing a significant decline in new launches, and the pressure from unsold inventory is the highest amongst major Indian cities. Market analysts predict a more pronounced decline in apartment prices, which could lead to increased market equilibrium. This challenging period, influenced by high unsold inventory and low demand, is anticipated to persist until the upcoming general elections. The rising interest costs and decreased net profits in 2013 will further necessitate developers to reduce their debt and improve their balance sheets.
In response to these market conditions, developers are strategically limiting new projects and implementing promotional activities to stimulate sales without resorting to base price reductions. This approach reflects their efforts to navigate current market conditions and regain stability.