Mumbai’s property prices down by upto 40% as RERA limits developer’s spending capacity
Land auctions held by City and Industrial Development Corporation (CIDCO) in Navi Mumbai last week saw bids that were at least 40 percent lower, hinting at the possible impact of the recently introduced Real Estate (Regulation and Development) Act (RERA).
According to a Financial Express report, a similar trend was reported across several parts of Mumbai Metropolitan Region (MMR).
The decline, experts say, is due to the implementation of RERA, which has limited the developer’s ability to buy land with advance payments from customers.
“Compared with a price of around Rs 1.15-1.25 lakh per square metre back in November, prior to demonetisation, bids this time around ranged between Rs 65,250 and Rs 96,000,” Ashutosh Limaye, head of research at JLL India, told the daily.
Limaye added that the activity levels are expected to remain low for the next eight months.
CIDCO was selling six commercial plus residential plots, covering an area of 6,000 sq m, in New Panvel. The plot were eventually sold off at an average price of around Rs 75,000 per sq m.
While there is some talk about prices being impacted by demonetisation, Manohar Shroff, vice-president, MCHI, Navi Mumbai debunked the claim on the grounds that developers were required to make payments to CIDCO via cheque.
“The builders’ ability to fund these land purchases has been curtailed thanks to RERA. The project plans need to be approved by the relevant authorities before the developers can accept bookings. And before the plans are submitted, CIDCO needs to be paid the full amount,” Shroff was quoted saying.
Meanwhile, Cushman and Wakefield reported that launches in the residential sector have declined by about 8 percent during the period April 2016 to March 2017 compared to the same period in 2015-16.
“A gradual improvement in buyer sentiment is expected towards the second half of 2017 as the impact of real estate reforms will begin to play out in the market,” the report says.
The report further claims that the real estate markets are expected to witness a lull period for the next few months as most developers try to adapt to and comply with RERA.
“We do not expect significant momentum in launches across most of the cities over the next 2-3 quarters as developers are realigning their marketing strategies to gear up for the implementation of RERA. They will focus mainly on registering the ongoing projects and establishing other internal processes to become RERA compliant,” it adds.