I had blogger earlier about Mumbai’s realty (see here and here).
It appears that now the bubble has finally burst.First, check out the tweet below by noted crusader Y.P. Singh:
A builder having criminal cases and politician money, refused to return money to politicians till cases sorted out and more investment made.
— Y.P. Singh (@yogeshpsingh) January 27, 2013
I think the key phrase is “more investment made”. Mumbai builders are struggling to raise money.The normal source of funds (aka customer advances) is not available as people are now not interested in buying at nose bleed valuations.To give an example of how absurd Mumbai valuations are, just look at this example:
In a premium realty project, a 4BHK purchaser has to take 4 parking lots compulsorily.Each lot costs 10 Lakh Rupees.So he is shelling out 40 Lakhs just for parking !!
Right now, there is a huge glut of inventory and half completed projects.A serious buyer armed with a cheque book can easily get upto 25% off from the rack price.
Investors are besieged with offers of buyback deals.One recent deal in Dahisar (E) goes like this:buy at 5000 psf and sell back to the builder at 6250 psf within a year.Before you get too excited, remember registration,stamp duty,vat,service tax, brokerage etc will eat up a chunk of your gains !And there is no guarantee the builder will actually honor the buyback !
Commercial space is another area where the inventory glut is noticeable.The most happening commercial area in Mumbai is BKC-where NSE,ICICI Bank etc are located.There are entire buildings there lying unoccupied.Tenants are bargaining hard and landlords are caving in to their demands.
Most realty observers felt that there would be a time correction but not a price correction in Mumbai i.e. prices will remain stagnant for a long period of time.But the current situation indicates that a price correction is truly underway.