rediff.com

NewsApp (Free)

Read news as it happens
Download NewsApp

Available on  

Rediff News  All News 
Rediff.com  » Business » Out-priced: Rs 12,000 a sq ft new normal in Mumbai!

Out-priced: Rs 12,000 a sq ft new normal in Mumbai!

Last updated on: January 4, 2013 12:30 IST

Out-priced: Rs 12,000 a sq ft new normal in Mumbai!

     Next

Next
Raghavendra Kamath in Mumbai

When Govindraj Nayak, who retired as an accounts executive from a textile-turned-real estate firm last year, was looking to buy a house in Vikhroli in Mumbai's central suburbs in 2009, the rates quoted were between Rs 6,000 and Rs 7,000 a square foot.

He hoped prices would come down following the economic slowdown.

However, when he finally bought an apartment in the area last November, he had to shell out Rs 12,100 a square foot.

Nayak's is not an isolated case.

Buyers as well as investors are fast realising that Rs 12,000 a square foot is the new normal in Mumbai's residential market, including most of the main suburbs.

Click NEXT to read further. . .


Image: Mumbai skyline.
Photographs: Punit Paranjpe/Reuters

     Next

Out-priced: Rs 12,000 a sq ft new normal in Mumbai!

Prev     Next
Prev

Next

Although the island city counts among the most expensive real estate markets in the world and prices have even crossed Rs 100,000 a square foot in south Mumbai, home to the Ambanis, the Tatas and the Birlas, consultants say the city has become unaffordable for middle class buyers.

According to global realty consultant Knight Frank, residential prices have gone up 50 per cent in Mumbai since the fourth quarter of calendar 2008, next only to Hong Kong and Shanghai in China, where prices have risen 95 per cent and 70 per cent, respectively.

For instance, Mulund in north east Mumbai, an entry point to the city, where apartments were available at Rs 7,000 to Rs 7,500 a square foot in 2009, today costs not less than Rs 12,000 a square foot.

Click NEXT to read further. . .


Image: A man cycles past newly constructed buildings in Mumbai.
Photographs: Punit Paranjpe/Reuters

Prev     Next

Out-priced: Rs 12,000 a sq ft new normal in Mumbai!

Prev     Next
Prev

Next

Similar is the case with Borivali, one of the last suburbs in north Mumbai.

"(Given) the way rates have gone up, you cannot buy an apartment in any decent area for less than Rs 10,000-12,000 a square foot. The city is out-pricing itself," says Akshaya Kumar, chief executive officer, Park Lane Property Advisors, a property consultancy.

"Today, even the smallest unit costs between Rs 70 lakh (Rs 7 million) and Rs 1 crore (Rs 10 million) in the main suburbs," says Amit Goenka, managing director and CEO of Essel Group-backed financial services firm Essel Capital Holdings.

Both consultants and developers blame the lack of approvals and increase in costs for the sharp spurt in prices.

Click NEXT to read further. . .


Photographs: Reuters

Prev     Next

Out-priced: Rs 12,000 a sq ft new normal in Mumbai!

Prev     Next
Prev

Next

"In the last two years, there were hardly any approvals which led to delay.

"Lesser inventory has resulted in increase in prices," says Park Lane's Kumar.

After a long hiatus, the Maharashtra government changed the development control rules early last year, which included the flower beds and balconies in the calculation of floor space index and allowed 35 per cent fungible FSI for premium.

FSI means the constructed area allowed on a given plot of land.

According to Goenka, regulatory changes in development control rules, coastal regulation zones and others have stifled the supply.

Click NEXT to read further. . .



Photographs: Reuters
Tags: FSI , Park Lane , Goenka

Prev     Next

Out-priced: Rs 12,000 a sq ft new normal in Mumbai!

Prev     Next
Prev

Next

On the costs front, Kumar says that labour costs have trebled in the past three years and cement costs have gone up 10-15 per cent a year, pushing up the realty prices.

"Today, construction costs have shot up to Rs 3,000 a square foot and FSI costs have reached Rs 3,500 a square foot and interest costs and approval costs add Rs 1,000 more. So costs constitute most of the price," says Om Ahuja, CEO (residential services), Jones Lang LaSalle.

Developers agree.

Click NEXT to read further. . .


Photographs: Reuters

Prev     Next

Out-priced: Rs 12,000 a sq ft new normal in Mumbai!

Prev     Next
Prev

Next

"Whatever (be the) increase in costs, (it) will be on buyers. The government has increased ready reckoner rates, which will increase the prices again," says Paras Gundecha, president of Maharashtra Chamber of Housing Industry.

The state government has increased the ready reckoner rates by 30 per cent from January 1, 2013, which is expected to shoot up total prices of apartments.

Ready reckoner rates are used for calculation of stamp duty and registration charges. "There is limited space to construct, but demand is more.

It is difficult to sell below Rs 10,000 a square foot," says Sunil Mantri, chairman of the Sunil Mantri group.

Click NEXT to read further. . .


Image: A vehicle drives past residential buildings in Mumbai.
Photographs: Punit Paranjpe/Reuters

Prev     Next

Out-priced: Rs 12,000 a sq ft new normal in Mumbai!

Prev     More
Prev

More

While the island city has an FSI of 1.33, suburbs have an FSI of 1 and developer can load transferable development right of 1 in the project.

 It means if you have a plot of 100 square metres, you can build 200 square metres on it.

Looking ahead

Most of the consultants say that prices will remain flat this year due to the overall market conditions.

"There is an obvious push back from customers and investors at these prices.

"Developers are giving soft cuts in the form of waiver on stamp duty and registration, free parking and so on," says Goenka of Essel.

Park Lane's Kumar expects prices to again pick up from 2014.

"In 2013, people will go out and start buying as stock markets pick up and global liquidity situation improves.

"Improvements in markets will have a spillover effect in real estate."


Image: Mumbai's Chhatrapati Shivaji Terminus.
Photographs: Reuters
Tags: FSI , Goenka , Essel

Prev     More
Source: