Moneylife Events
‘Residential property prices in Mumbai may correct by 33%’

Pankaj Kapoor, managing director of realty research firm Liases Foras, expects realty prices to come down slowly and in instalments, as and when developers have no other way to get funds but to sell property at reduced rates

"I can see a 33% correction coming in residential property prices in Mumbai, because the market is going to enter a consumer circle," Pankaj Kapoor, managing director, Liases Foras, a real estate rating and research agency, has said. Mr Kapoor was speaking at a workshop on real estate prices, hosted by Moneylife Foundation at the Moneylife Knowledge Centre today.

Mr Kapoor explained the viability of buying a property in today's market, which has seen prices escalate to unaffordable levels. He offered prospective home buyers tips on how to tackle the situation, through an analysis of the real estate market to gauge the direction the prices will go in the next year.

He said that it was foolish to consider buying property in the far-flung suburbs, with no connectivity, because one must live near the workplace. "This idea of affordable housing is a myth, because the commercial centres are not shifting, and prices there are unaffordable. No wonder, we see more slums cropping up," Mr Kapoor said.

When asked about the areas in Mumbai which he considered a good bet to buy a home, Mr Kapoor listed  Kurla, Vadala, Sewri and Gorai as attractive options. He said that once the metro came up, these areas would benefit and develop the most.

Mr Kapoor said that on the basis of current property offtake, Mumbai was in the worst position, while Pune was the best-placed. "Pune's stock can be cleared in 12 months. However, Mumbai will require 40 months," he said. He said that since many financers were shifting to Pune, more capital would be injected in that market and set off speculation. "After a year or so, may be Pune will also see irrational price hikes fuelled by speculation," he said.

He asked buyers not to bother too much about developers and to concentrate on the property itself. "Most big brand developers are in problems. A sensible investor and a sensible buyer would stay away from big names and look at the project and consider: Is it a liveable locality? Can they sell at that price? Will the delivery be on time?"

"The problem with most valuations is that they go by the prices next door. So when a developer hears that the adjoining property has been priced at Rs2 crore, he will also hike his own prices. However, he doesn't consider whether sales are actually happening at those prices," Mr Kapoor said. "Even professional valuations are faulty on these accounts. So, inventory piles up, prices rise and the market becomes more lopsided."

When asked why despite various predictions, the prices had not come down, Mr Kapoor said the correction would be slow and in instalments. He said that even when prices don't appreciate, this must be considered as a correction too.

"The developer reduces prices when there is no other way to get money apart from sales. Now, even when the borrowing rates are high, there is money available, either from private equity or other channels. As these flows gradually dry up, builders will be forced to bring their prices down to a level which suits the customer," he said.

Read related reports: Will realty fall? Mumbai properties costliest, but sales lowest among all metros in the country

Will realty fall? Realty boom in tier-II/III cities a myth, says Liases Foras founder




5 years ago

I dont think the price drop wld be that much as most of the money in real eastate is black money invested. Most of the property buyers are also investors. Black & white ratio as become so common but still govt. seems to be playing blind man to this. After having so many laws & rules, even thn builders does not seem to be afraid of breaking it. They are selling parking space, loading is as high as 40 %. Most of the builders do not complete the project as marketed initially. All this has become so common but Govt. dosnt want to make any correction to this as most of the money involve in all this belongs to our administrators who are running our country and the middle income group has to take the entire burden of all this. Correction in property prices is just a myth coz ths people are not losing anything rather they are converting most of thr black money into white.


5 years ago




In Reply to M A ZOKANDE 5 years ago

Correctly said, there was a correction seen after 1997.


5 years ago

Insightful Analysis of Real Estate Market
Hope it will be so


5 years ago

We have been hearing this for last couple of years from various experts including stalwarts like Deepak Parekh, but a drop of 33% in real estate prices of Mumbai will remain a mirage for the end users. Before you know it would have risen again. So, if you "have to buy it", do not try to time it (as they say in share market).


5 years ago

I don't think so, builders r in profits even if they sell 40-50% of their projects. In case of liquidity crunch, they are passing discounts to their regular investors not to end users.


5 years ago

Prices are definately stagnated for lack of buyrers but i doubt whether prices will really fall. The network between builders, brokers,banks , politicians is too strong to warrnt a decrease of 33% . Only time will tell whether this will happen meanwhile prospective buyers must always be on the lookout otherwise they will miss the bus!!!


5 years ago

No transparency in real estate market.. People avoid tax and buy property...In Mumbai its really hard to get flats with full cheque amount in western suburb... its minimum 75-25% as Cash they need... No body stopping them too... prices will only come down if unaccounted money from politicians , businessman and underworld comes down..


5 years ago

Completely agree with Mr Pankaj's view...

Rakesh shah

5 years ago

Good information in todays confused market for actual buyers.


5 years ago

One aspect not covered in this otherwise illuminating article is the cash/cheque ratio. Increasingly, in many parts of the urban South and now also in NCR, "full cheque" deals are becoming more and more popular, with cash components reaching an all-time low except in cases of ancestral old properties.

Is it, therefore, likely that transactions in Mumbai would also move towards this trend?


5 years ago

From last 1yr, I amreading this but due to Black money from Swiss bank coming back, prices are increasing only..Moneylife should raise this Black money point to all Income tax dept as common man cant do it..

Monsoon 4% above normal; set to withdraw by next weekend

Twenty four of the 36 meteorological sub-divisions received normal rainfall this season, while nine sub-divisions got excess falls, the India Meteorological Department (IMD) said in its weekly update for the season

New Delhi: After bountiful spells leading to 4% excess rains across the country, the south-west monsoon is expected to start withdrawing from the end of next week, reports PTI quoting the weather office.

The northwest region, which experienced heavy rains over the last two days, will witness a decrease in rainfall activity next week, it said.

Twenty four of the 36 meteorological sub-divisions received normal rainfall this season, while nine sub-divisions got excess falls, it said.

Only three sub-divisions covering the entire north-eastern region experienced deficit rains, the India Meteorological Department (IMD) said in its weekly update for the season.

“Conditions may become favourable for withdrawal of southwest monsoon from some parts of northwest India towards end of the week,” the weather office said in its forecast for next week.

The decrease in rainfall activity could bring relief to farmers who are now looking forward to harvest the kharif crop.

Normal rains across food bowls of the country have raised hopes of a bumper crop with agriculture minister Sharad Pawar pegging the kharif output at 123.88 million tonnes against 120.20 million tonnes in the same period last year.

The weather office has forecast fairly widespread rain over east and adjoining central India, west coast and north-eastern states during next week.

In area-wise distribution, 91% area of the country received excess or normal rainfall. 466 (77%) out of 603 districts of the country have received normal to excess rainfall, the IMD said.


Staggered climb: Weekly Market Report

Nifty will see a struggle up to 5,190

Support from France and Germany to help Greece avoid a debt default and to stay in the European Union, and the European Central Bank's assurance to help get dollar funding for regional banks boosted global markets this week. This also helped offset negative sentiment at home and the market register gains for the week. Though the indices ended flat, the market closed net positive for a third week.

On Monday, the market suffered a sharp cut after it was announced that industrial output for July fell to 3.3%, a 21-month low. While the market opened higher on Tuesday, a negative opening on the European bourses pulled the indices down for a third day in a row. Brushing aside higher headline inflation for August, the market made smart gains on Wednesday. Late gains ensured a positive close again on Thursday, and the market discounted the 25 basis point rate hike by the Reserve Bank of India (RBI) on Friday, to close the week in the green.

Overall, the Sensex gained 67 points to close the week at 16,934 and the Nifty settled 25 points up at 5,084. If buying continues, we may see a strenuous journey to the level of 5,190. However, if the trend reverses, the Nifty could slide to 4,875.

Among the sectoral indices, BSE IT gained by 3% and BSE Oil & Gas rose by 2%, whereas BSE Capital Goods fell by 3% and BSE Consumer Durables lost 2%.

The top gainers on the Sensex were Tata Motors (up 6%), Infosys, NTPC, DLF and ONGC (up by 5% each). On the other hand, Larsen & Toubro (down 5%), Bharti Airtel, Tata Steel (down 4% each), Hindalco Industries and BHEL (down 3% each) settled at the bottom of the index.

The Nifty leaders were Grasim Industries (up 7%), Tata Motors, NTPC (up 6% each), Infosys and ONGC (up 5% each). The major losers on the benchmark were HCL Technologies, L&T (down 5% each), Bharti Airtel, Hindalco Ind (down 4% each) and Tata Steel (down 3%).

Government data announced early in the week showed industrial growth in July was down to 3.3% from 8.8% in the previous month and 9.9% in July last year. The slowdown in factory output was the worst since October 2009, when it grew at only 2.3% under the impact of the global financial crisis.

Headline inflation inched closer to the double-digit mark in August, rising to 9.78% on the back of soaring prices of food and manufactured products. Overall inflation, as measured by the Wholesale Price Index (WPI), stood at 9.22% in July, and the rate of price rise was at 8.87% in August 2010.

Despite the sharp fall in industrial output, the RBI, on Friday hiked key rates for the 12th time in the last 18 months to rein in high inflation. With this hike, the policy rate has been increased by a total 325 basis points in one and a half year to 8.25%. This increase, which will lead to higher lending rates, has already affected the housing and automobiles loans business as well as credit off-take by industry, which is seeing a slowdown in sales.


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