MMR’s residential real estate recovery is unlikely to sustain

According to a 19 November report by Crisil, new home sales in MMR in October were 1.3 times higher compared to January after the Maharashtra government reduced stamp duty from 5% to 2% till December and to 3% for the January-March period. “While overall rebound in real estate demand in October was faster than envisaged earlier, its sustenance post the festive season will be a monitorable," Crisil said. “On a full-year basis, we estimate overall primary sales to witness a decline of 40-50% in top 10 cities."

“Typically, in Mumbai, for a ₹1 crore home, builders would not have accepted less than 10% as booking amount," a real estate broker said, requesting anonymity. “Now, the booking amount is down to anywhere from ₹1 lakh- ₹5 lakh, with the option of a full refund if the buyer wants to cancel the booking later. So, while sales in these festive months show higher bookings, the actual conversion into sales may be lower."

Many developers are also absorbing the cost of goods and services tax and, in some cases, even footing the bill for building maintenance fees for the first 1-2 years, he added.

Anarock Property Consultants had said that MMR (which includes Mumbai, Navi Mumbai, Thane and parts of Palghar and Raigad districts) reported sales of 9,200 units, while Knight Frank, another consultancy, said sales in July-September were 7,635 units.

“Bookings have really increased but sales are still only 60-65% of what they were pre-pandemic. We have to be very cautious when we say that demand is back to pre-pandemic levels," Samantak Das, chief economist and head of research, JLL India, said.

“Residential sales for the last 3-5 years have not been good and developers are introducing flexible strategies to boost sales; this has become more pronounced after the pandemic. Most developers are using the opportunity to increase bookings, charging a marginal booking amount and a full refund. But until GDP growth returns and buyers become confident about the job market, it is hard for the real estate sector to sustain growth," Das added.

According to Yashika Rohiira, proprietor, Karma Realtors, who operates in the city’s western suburbs, only 70-75% of such bookings may eventually convert to sales. “It is true in some cases prospective buyers are placing refundable token amounts and may later decide not to go ahead with the transaction. Pre-covid, over 90% of bookings converted to sales; today, given income uncertainties, developers expect 70-75% of bookings to convert. Developers have obligations and targets to report to their finance partners and project investors; so showing bookings/intent for a particular quarter is essential."

Vishal Kadrekar, proprietor of Fair Value Property, which operates in and around Parel, Prabhadevi and Worli, said the rise in registrations will not last once stamp duties return to original rates. “A lot of registrations being reported now are for property sales that happened pre-covid," he added.