The Mumbai real-estate market saw significant price movements in 2005, with prices of both commercial and residential properties spurting on heavy demand.
The year saw increased realty activity by stock broking firms, financial institutions and merchant bankers. The big leases of the year included Lehman Brothers, DSP Merrill Lynch, Prudential Process Management, and J P Morgan Chase.
The Mumbai high court order setting aside the sale of NTC mill land led to a stalling of construction projects for a brief period, resulting in a supply crunch, which put more pressure on values.
The report notes that an order in favour of the developers and mill owners will have a positive impact on the market releasing more supply into an already constrained market. It will lead to a correction in values, giving a much needed breather to the consumer.
The first half of the year saw a raft of new companies lapping up office spaces all over Mumbai, as a result capital and rental values shot up by 15 per cent across all micro markets, says a report published by real estate consultants Cushman and Wakefield.
However, in the second half, availability of quality office spaces was clearly falling behind demand, which caused commercial and capital values to spiral by 25-40 per cent, while rentals went up by 15-20 per cent. Falling vacancy rates in Lower Parel, Vakola and Kalina led to significant price rise in these areas.
The outlook for the market in 2006 suggests a further rise in values as the shortage of quality stock will continue in the face of increase of rentals by Information Technology Enabled Services, Insurance, Banking, Finance, Pharma and Aviation sectors. Select locations in Navi Mumbai are also likely to see increased leasing from the ITeS sector.
The Reliance Special Economic Zone, along with two others is slated to come up 2006, which is expected to increase supply of quality of office spaces in and around Mumbai.
The residential realty market saw an unprecedented rise in the price of quality housing over the past 12 months, with capital values rising between 25-40 per cent over 2004. Lease rentals in the city also saw a rise of 10 per cent while investment in residential property continues to be an attractive option.
According to the report, capital values in the city are likely to remain firm over the first half of the New Year as the next tranche of quality stock is only expected to enter the market by 2007.
The report notes that as land prices are shooting up in areas where parcels are getting depleted fast, the developers are likely to look at a combination of residential, commercial, retail and hospitality to offset the higher cost of acquisition. This higher cost of acquisition is likely to be passed on to the end user eventually, the report says.
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