Home dream remains distant: Fewer new projects for Mumbai
According to experts, factors such as a dip in sales, unsold inventory, negative sentiments, upcoming real estate regulator and wait for the new development plan (DP), which may have new provisions and guidelines for building construction, have contributed to the crisismumbai Updated: Jul 26, 2016 11:02 IST
The real estate sector continues to be plagued by a slowdown -- the number of new projects launched in the past six months in the Mumbai Metropolitan Region (MMR) has dropped approximately by 30%-40%.
According to experts, factors such as a dip in sales, unsold inventory, negative sentiments, upcoming real estate regulator and wait for the new development plan (DP), which may have new provisions and guidelines for building construction, have contributed to the crisis.
According to Liases Foras, a real estate research firm, less than 200 new housing projects were launched in the past six months, lower than the average 300 launches during the same period in the past few years. “Builders are seeing a bleak future ahead, as they are not sure whether such launches will lead to sales,” said Pankaj Kapoor, CEO, Liases Foras. “Moreover, builders are loaded with a huge stock of lakhs of unsold houses. Their priority is now to sell them,” he added.
The MMR covers Mumbai, Navi Mumbai, Thane and Raigad and is considered one of the prime real estate markets in India. The MMR currently has approximately 2.20 lakh unsold apartments while in Mumbai alone the number of unsold houses is pegged at 75,000.
The Maharashtra Chambers of Housing Industry (MCHI), the apex body of the builders called the situation challenging. “There is a huge uncertainty in the market. This has affected the overall launches in the market,” said Dharmesh Jain, president, MCHI. He said the upcoming Real Estate (Regulation and Development Act, 2016, has also resulted in a dip in of sales. “Builders are cautious before new launches because of the RERA Act,” he said.
The RERA Act is a stringent act which dissuades changes in the construction plans and prescribes punitive action against errant builders.
According to realty expert Sunil Bajaj, builders are now faced with liquidity issue. “The investors who bankrolled the projects for decades have now disappeared, as they no longer anticipate attractive returns on their investments. Many are even finding it difficult to exit from their existing investments,” said Bajaj. “The banks and non-banking financial institutions are conservative in disbursing funds to real estate projects,” said Bajaj.
The real estate industry has been going through a recession over the past few years. Builders have raised the realty prices to unaffordable levels forcing many buyers to postpone their purchase plans. In addition, the Reserve Bank of India (RBI), as a cautionary exercise, laid down stringent lending norms and hiked interest rates on home loans.
WHY FEWER NEW LAUNCHES
1) Realty sales have dipped significantly
2) Monetary crisis as investors have deserted the market.
3) Banks and NBFCs are stricter in disbursing loans
4) The DP is still awaited by the builders
5) 2.20 lakh unsold houses in the MMR, 75,000 in Mumbai alone
6) Negative sentiments about the market
7) RERA act forcing builders to become cautious.