Mumbai: Home prices in Mumbai, India’s most expensive property market, may plunge as much as 20% over the next year as record-high prices dent demand amid a glut, according to the country’s largest real estate fund.

Northern parts of the city will lead the declines as developers, weighed down by rising inventory, cave in to attract prospective customers with cheaper offers, Khushru Jijina, managing director at Mumbai-based Piramal Fund Management Pvt. Ltd, said in an interview.

“There is definitely stress in the Mumbai realty space," Jijina said in an interview in Mumbai. “Sales velocity has slowed. Buyers are sitting on the fence, nobody’s in a hurry to buy. And, now developers are getting tired."

Mumbai home prices slipped almost 2% in the June quarter from the record of 13,120 per square foot set in the quarter ended 31 December, according to research and consulting firm Liases Foras Real Estate Rating and Research Pvt. Ltd.

It will take at least 45 months to find buyers for unsold homes in Mumbai, the consultancy said, compared with 41 months on average across India’s top eight cities. The unsold inventory is between eight to 12 months in an efficient market, it said.

The real estate funding arm of the conglomerate owned by billionaire Ajay Piramal finances deals ranging from construction financing to equity funding. Assets under management across funds total 8,400 crore of equity and has disbursed 4,000 crore of gross loans. Piramal Fund has entered into a $500 million strategic alliance with Canadian Pension Plan Investment Board to provide high yield rupee debt finance to residential real estate projects across the larger cities.

Home oversupply

There is an oversupply of homes in the northern suburbs of Thane and Mulund, which could see a 20% price decline, Jijina said.

Still, there is demand for homes at the right price, Jijina said. Developers are getting land at cheaper prices than a few months ago, deals are being struck at lower prices, which in turn will allow builders to cut selling prices adding to the price correction, Jijina said.

India’s office market is picking up and it will witness a recovery, Jijina said. Piramal has started lending for commercial assets and the fund will get into commercial assets at the right time, he said. Bloomberg