Mumbai Home Prices Drop First Time In A Decade, Says Knight Frank

Residential prices in Mumbai dropped for the first time in a decade in 2017 as demand was yet to recover from the disruption caused by demonetisation, a new housing regulation and the Goods and Services Tax.

The weighted average prices were down by 5 percent on a yearly basis last year, Knight Frank said in a report. “The trend stems from the periodic deterioration of the market’s health with launches coming to a grinding halt,” said Samantak Das, chief economist of research at the real estate consultancy. This was aided by developers cutting down prices to offload their unsold inventory, he said.

Prime Minister Narendra Modi’s decision to clamp down on nearly 86 percent of the currency in circulation in November 2016 hurt the cash-driven real estate markets in the months that followed. The government then rolled out the Real Estate Regulation Act that arms buyers against false promises and delays. The implementation of the GST followed. The back-to-back disruptions kept the demand low. The market has shifted towards affordable housing, Knight Frank said.

Here are the key takeaways from the report:

• Residential sales in the second half of 2017 were up 19 percent from the same demonetisation-hit half in 2016.
• New home launches plummeted 23 percent year-on-year as developers shifted focus towards completing existing projects. Annually, new home launches fell 32 percent on a yearly basis.
• Unsold inventory in Mumbai declined 25 percent from the previous year, mainly due to fall in launches.
• Residential launches across eight Indian cities dropped 41 percent year-on-year with Hyderabad recording the steepest fall of 70 percent, followed by by the National Capital Region at 56 percent, Bengaluru at 41 percent, Pune at 37 percent and Mumbai at 32 percent.
• Residential sales declined to 7 percent year-on-year in 2017, with the top eight cities seeing a drop in sales as measures such as RERA and Pradhan Mantri Awas Yojana yet to make a significant impact to boost consumer sentiment.
• In terms of sales, the Mumbai market recorded a 19 percent uptick in the second-half of last year. But overall sales volumes reflect a declining pattern.

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