Home / Politics / Policy /  How realty churn is affecting NCR, Mumbai builders

A prolonged slowdown and the implementation of the Real Estate Regulation and Development Act have led to a churn in the real estate sector. Builders are battling tepid demand and unsold inventory. Mint analyses the impact on National Capital Region(NCR) and Mumbai.

How bad is the real estate crisis in NCR?

The National Capital Region (NCR) remains the worst impacted among major real estate markets in the country, with home sales declining in each of the last four quarters. In the September quarter, sales dropped by 12% to 13,820 units, making NCR the only market to register a slump among eight cities. Insolvency cases against some of the largest real estate firms such as Unitech Ltd, Amrapali Group and Jaypee Infratech Ltd have further weakened the sentiment of homebuyers in the region, leaving many of them worried about the fate of their investments in the stalled projects.

Have property prices corrected in NCR?

High levels of unsold inventory have put prices under pressure in the country’s largest property market. Currently, builders in NCR are sitting on a total unsold stock of 240,000 units, according to Liases Foras Real Estate Rating and Research. Weak demand has led to a 15-20% decline in home prices in the region, worse than that of the Mumbai and Bengaluru regions. In the resale market, residential property prices have seen a similar fall. The Union government’s decision to implement demonetization of high-value notes in November 2016 hampered the secondary market’s growth the most.

Is a recovery expected anytime soon?

Though home sales did pick up last year, a full recovery may be a long way off, say analysts. The liquidity crunch in NBFCs has put a question mark on the realty sector’s recovery.

Is Mumbai, India’s costliest market, becoming affordable now?

While property prices have corrected 10-15% in certain pockets of Mumbai, it is still one of the most expensive cities in terms of real estate prices, as a majority of the apartments cost at least 1 crore. However, given slow sales and most buyers looking for mid-income homes, developers are coming up with affordable properties, mostly by shrinking their sizes. In the suburbs, large realty firms are introducing homes that cost less than 1 crore, in a bid to widen their customer base.

How will the new development plan impact Mumbai market?

Under the new Development Plan 2034, around 3,700 ha are being opened up for residential develop-ment. The plan has raised floor space index (FSI) for homes and commercial buildings in the city and suburbs. Whether these steps will improve supply of affordable homes to the masses remains to be seen. Experts say realty prices may correct a bit due to a likely drop in development costs, as premium development expenses have been cut 10% for residential development.

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