Mumbai – Hot Property

The hottest commodity in the Indian economy today is property. In Mumbai, property prices are growing at a rapid pace of 30-40% per annum with more foreign companies getting into joint ventures with Indian companies. The demand for commercial space has been boiling. The other factors that contribute to the fire are the retail boom, aged properties being re developed and demand for residential space. India’s retail real estate market is believed to touch a whooping figure of approx USD 450 billion by 2010. Textile mills occupying prime locations in Mumbai are being converted into retail spaces.

With the Mumbai stock market going turbulent off and on, investors are placing their cards on property, which seems to be a safer gamble. On the other hand, there is a fear that the in the near future this bubble will burst, which will result in a price correction. Nevertheless, demand for space in a city like Mumbai is never going to slide. For the past five years the interest rates of the home loans have been quite friendly thus encouraging and giving a lot of middle class residents of Mumbai the hope of fulfilling their life time dream- to own a space in the city. The occupancy levels of the suburbs and outskirts have increased with urban rental rates on the rise.

In the recent past there have been complex problems related to illegal procurements of land by builders. The state forest department has claimed that approx 1000 acres of land in the western and eastern suburbs have been encroached upon for the development of both commercial and residential complexes. However, this matter is pending in the courts and the battle between the residents and builders versus the state forest department is on going. The municipal corporation is also geared up to enforce a property tax that was ignored in the past few years. This property tax of 40% to be levied on property owners renting out their premises may indirectly cause a further escalation in rents. Most landlords will seek to pass on this tax on the tenants. The Maharashtra Government recently passed a law, whereby rentals henceforth are to be calculated on carpet area against the old format where the area calculations were being done on a built up formula.

As a result of this, the rate per square has been hiked. In all scenarios the bottom line is, the brunt of laws and taxes are landing in the pockets of the tenants.