Real Estate Scenario in Mumbai

India’s growing popularity as the latest commercial hotspot is slowly turning out to be a bane for all those seeking land in the financial capital of Mumbai. The ever burgeoning real estate market in Mumbai had been blessedly sluggish for the past few months. Though the property prices never came down, the rate of increase remained low – as low as five per cent in areas of Vashi, Goregaon and Thane. However with more and more premium commercial establishments waiting to be constructed, property rates in the financial capital are expected to rise by about 50 per cent or more.

Ever since the Rs 4,000 per sq. ft. booking for Ashoka Towers two years ago, property prices in Mumbai have been steadily going through the roof.

Today, land in Mumbai is costlier by an additional Rs 18,000 per sq. ft. Real estate developers estimate an alarming raise of 30 percent to 50 percent in demand, as well as in prices in Mumbai, Nasik, Pune from March onwards. One of the major factors contributing to this steady increase, is the fact that out of 90 lakh homes in Mumbai only 30 per cent homes have been built so far. In areas such as Khargar, many flats have been bought but till today 70 per cent of the residents are yet to settle in. As homebuyers in Chennai and Bangalore prepare to spend more on EMI’s than on buying big homes, and with the overbuilding that is already happening in Bangalore, demand for land in the prime commercial spots in Mumbai is increasing. The prices of commercial realty in Bandra-Kurla complex of Mumbai are even more than the commercial properties in New York and such unrealistic price levels have to be corrected with effective intervention.

 None of these constraints seem to deter the corporate bigwigs though, from making a beeline for acquiring commercial land space in Mumbai. This is exemplified by the recently concluded lease transaction by the ABN AMRO Bank. The bank, which is housed in the third floor of the twelve storied Sakhar Bhavan at Nariman Point in Mumbai, in its lease renewal, has agreed to pay a monthly rental of Rs 500 per sq. ft. The highest deal before this had taken place Connaught Circus, New Delhi, for an estimated Rs 400 per sq. ft. Commercial rentals in other cities, as compared to Mumbai, are still hovering around hopeful Rs 100-400 per sq. ft. In Bangalore, it is Rs 150-200 per sq. ft. and Rs 60-100 per sq. ft. in Hyderabad.

With property prices on a steady increase and vying for top place among some of the most expensive cities of the world like London, Tokyo etc., Mumbai has undoubtedly become a home buyer’s mirage. One wonders what the effect of this trend will be on the middle class man. Ever since the 2007 decision of the state housing authority to increase rates of its housing stock by 40 per cent, Mumbaikars and those chasing the Mumbai dream have been left completely in the lurch. Already short of “economical” options, these people may very well be regarding the news of the imminent hike in property rates as the proverbial last nail on the coffin.