According to the latest Knight Frank report, the property market in Mumbai is seeing low levels of activity. There are fewer apartments and homes being put on the market as sellers wait for conditions to improve. Buyers are also being put off by increases in building costs, and some of the better neighbourhoods are seeing vacancy rates as high as 48%.
Between 2011 and 2012 just 45,000 apartments were sold in Mumbai's metropolitan region which is well below the market average of 80,000 units a year. There is a current inventory of 80,000 flats, but many buyers are choosing to wait and see believing prices will drop in the near future.
Since the peak of the market in 2007 sales have dropped by more than 60%, and by 35% from 2011. Normally this decline in sales would have brought about a price correction, but this hasn't happened as a delay in approvals has ensured the market equilibrium is maintained. The fall in the number of units launched has offset the impact of prices.
So far this year just 55,000 flats have been launched which is a decline of many 40% compared to the 92,000 units launched in 2011. Developers are choosing to actively delayed project launches, and to sell current inventory before launching any fresh product to help ease any downward pressure on prices. Many developers simply cannot afford to cut prices as the costs of land, raw materials and labour have risen substantially, eating into current operating margins of 30% to 35%.
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