Realty crisis: 108K units remain unsold in Mumbai
The real estate sector continues to stagnate in Mumbai as a staggering 108,929 housing units remain unsold in the city.
From January to March, 6,780 housing units were launched in Mumbai, of which 5,775 houses were sold.
As an average of 1,908 housing units is sold every month in Mumbai, it will take at least 57 months to sell its unsold inventory, according to a study conducted by real estate research firm Liases Foras, which pointed out the realty sector’s grim situation, especially amid the second wave of Covid-19 lockdown, where the entire sector has been paralysed.
In any realty market, the ideal inventory should not be above 15-20 months.
According to Pankaj Kapoor, managing director, Liases Foras, this huge inventory is a cause of worry.
“The second wave of Covid-19 will only make things difficult for the real estate sector as the sales volume will decrease significantly,” said Kapoor, adding, “In addition, the state government has made things more difficult by withdrawing the stamp duty cut in March-end. The stamp duty cut had helped drive the sales in the past few months,” he added.
The Builders’ Association of India (BAI) said both slowdown and government policies have caused havoc in the realty sector, resulting in the piling up of such a huge inventory.
“There was an economic slowdown in the past few years which slowed down our sales considerably. In addition to it, the government levied huge premiums and taxes, forcing us to hike the real estate prices, which drove homebuyers away from the market,” said Anand Gupta, chairman, BAI (housing and RERA committee).
“Just as things were looking up, the second Covid-19 wave and the subsequent lockdown again dissuaded homebuyers from buying properties,” he added.
The Mumbai Metropolitan Region (MMR) region, which along with Mumbai includes Navi Mumbai, Thane and Raigad, also has an unsold inventory of 286,992 units. It will take at least 48 months to clear MMR’s inventory, given that approximately 6,000 units are sold monthly.
Paras Gundecha, founder of Gundecha Group – one of the leading real estate firms – said that the coming days may not be good for the realty sector.
“The real estate sector is driven by sentiments, and currently we are witnessing a negative sentiment all across. We will face difficult times in the coming days due to the Covid-19 wave, and for this, the government needs to give us incentives like re-imposing the stamp duty cut,” said Gundecha.
The real estate industry in the past few years has been going through a recessionary phase. Builders raised realty prices to unaffordable levels, forcing many buyers to postpone their plans to purchase. In addition, the Reserve Bank of India (RBI), as a cautionary exercise, laid down stringent lending norms. However last year, the Covid-19 pandemic caused an upheaval in realty market, with sales plummeting considerably. Last August, the government announced its decision to reduce stamp duty levied on sales of apartments to 2% from September 1 to December 31, 2020, and then hike it to 3% from January 1 till March 31, 2021. The move had played a huge role in boosting sales of both primary and secondary market. However, after March end, the government refused to extend this scheme despite the real estate sector’s plea. The second wave of Covid-19 then hit the country, bringing more distress for the sector.