New Delhi: The gradual rise in interest rates has somewhat slowed home buyers in the first and second quarter of 2007. However, Mumbai suburbs and extended suburbs continued to absorb the demand emanating from the land-strapped city, with residents opting to take advantage of lower costs and newer large-scale residential developments.
The residential demand has shifted from South Mumbai to North Mumbai owing to new supply and comparatively lower prices. In addition, with the Suburban Business District emerging as a favoured office destination, employees in these organizations preferred affordable and new accommodations in the suburban locations in close vicinity.
According to a Knight Frank report, the year 2007 saw an addition of about 33 million sq.ft. of residential space. Bulk of this space, amounting to about 75% of the total supply in 2007, was concentrated in the suburban locations from Bandra to Dahisar and Kurla to Mulund. The residential developments on the mill lands of Central Mumbai have also added substantially to the stock.
“Over the past few months, property prices have flattened out as there have been affordability issues and the interest rates have not been conducive,” said Aditi Vijayakar, director, transaction services (residential), Cushman & Wakefield.
Powai and Central Mumbai locations of Worli, Lower Parel and Prabhadevi have witnessed maximum appreciation in the range of 40-50%. Worli, Lower Parel and Prabhadevi have capital values ranging from Rs25,000-35,000/sq.ft, whereas Powai and Chandivali command capital values ranging between Rs6,000-13,000/sq.ft.
The current market conditions coupled with rising interest rates and spiraling inflation has raised questions both for the investors as well as the end user. For the investor, does it make sense to hold on or book profits while for the end user, does it make sense to buy that dream home or should one postpone the purchase? What are the areas that one can still invest in ar questions that are uppermost in the minds of those wanting to invest in property.
In the face of substantial planned supply (approximately 36 mn.sq.ft.) expected to enter the market in 2008, values are expected to soften. “I expect the prices to correct at least 10% by the third quarter of the current fiscal. For smaller projects, the correction could be more severe,” Vijayakar stated.
With a number of infrastructure projects in the pipeline, the construction activities in the region are expected to step-up even further. Knight Frank report suggests that Thane along with Navi Mumbai will become favourable options for home-buyers in the middle income category.
If you wish to invest, experts suggest that Panvel and Alibaugh can witness a 30% appreciation in capital values in the next 3-5 years. “Incase one has been holding on to a property for investment purposes, it’s a great time to sell as the prices will correct in the times to come,” Vijayakar adds.