Mumbai Residential Real Estate Review – March 2011


After a one-year period starting 3Q 2009, which saw a strong recovery with a record 40%+  increase in prices, the Mumbai residential real estate market has been seeing a slowdown over the last two quarters across various micro markets.

The past six months have seen the return of negotiability in asking prices, and saw the return from a sellers’ to a buyers’ market. Both registration data and home loan disbursals are indicating a distinct slowdown. The number of apartments being sold in the first quarter of 2011 is considerably lower than in the corresponding period of 2010. Developers who were selling their entire projects in a few weeks are now taking months to sell their unsold stock.

Many home buyers are playing the waiting game, anticipating a further correction. The key reasons behind this slowdown are higher prices, higher interest rates impacting affordability, lack of liquidity, scams diluting investor sentiment – and, to a lesser extent, excess supply in a few micro markets. Any slowdown in the economy has not been a key criterion.

Many developers and agents admit that sales have slowed down. Gone are the days when large numbers of apartments were sold during launch itself. The trend of short term-speculators booking apartments at pre-launch or launch prices and selling them a few months later at higher prices (as witnessed in early 2010) has reduced considerably.

Some of the other trends witnessed over the last six months include:

  • Developers offering significantly lower rates to customers willing to cough up a 30-40% down payment
  • Developers launching smaller-sized units
  • Corporates rushing to divest their owned apartments that are non core to their business, anticipating a further correction in prices
  • Developer and investor interest increasing in some northern micro-markets and BKC which are close to business districts, and
  • Increase in end-user preference for older projects with lesser loading
  • Properties with deficiencies in location or overly optimistic asking prices have been the slowest to move

Rental yields from residential property in Mumbai remained steady at 3% to 3.5%.


Real estate buyers and sellers are conjecturing over how the Mumbai residential real estate market will fare over the next three quarters of 2011. Evidently, residential property demand will experience further pressure in 2011. The market saw a period of unprecedented expansion in the first three quarters of 2010, and it is reasonable to expect that price appreciation will flatten or decline in many areas.

Given the current uncertainties surrounding regulatory aspects such as parking FSI, some prominent proposed high-rises will face delayed approvals, impacting sales. It is also expected that developers will offer smaller units without compromising on the amenities to make them more affordable to a larger customer base.

With more than half of the available work-day time in Mumbai often being spent in severe traffic and fuel prices soaring relentlessly, access to public transportation and road infrastructure will become key drivers for taking housing decisions in the future. Due to this, integrated townships with walk-to-work options will find more takers. Buyers more than ever will look at aspects such as planning approvals, developer profile and verifying agreement terms. No major increase in housing construction activity is expected until sales and prices recover.


The current correction may last for as much as 4-5 months, or even out during the festive season. However, a full-fledged recovery to Mumbai’s glory days will happen only if the Government puts more pressure on banks to lend money to the real estate and housing sector and interest rates on home loans drop. Meanwhile, Mumbai’s developers will play a cautious game and avoid launching too many large projects in the next couple of quarters.

Like most others, Mumbai’s residential market is not immune to demand-supply dynamics. Any major increase in supply will surely have an impact – with increased supply, vacancy rates will increase and developers have to reduce pricing. Moreover, interest rates are likely to rise marginally again, further curbing the demand for homes in the short term.

Mumbai’s real estate story will continue to make for a fascinating read, and it will always pay off in the long run. However, developers need to realize that volumes are inversely related to price… the lower the price, the higher the opportunity.

Ramesh Nair, Managing Director – West India, Jones Lang LaSalle India

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CEO & Country Head, JLL India


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