The supply of high-value flats in the city will outstrip demand from March. At present, there is an approximate supply of a million sq ft for the top-end residential market in the metropolis
High-value flats, starting with a price tag of Rs5 crore (for a luxurious two, three or four bedroom, hall and kitchen) had vanished from the market between 2007-2008. The slowdown saw the affordable housing segment growing. However, during the second quarter of the current fiscal, the high-value flats segment also reported sales. Seeing the movement in this segment, a number of developers again started developing high-value flats around Mahalaxmi, Lower Parel, Prabhadevi and Worli in Mumbai. There is a huge amount of supply of approximately a million sq ft in the market for this segment. But what about the future demand scenario?
“There will be a slowdown in the tempo—which you saw in the past few months—for high-value flats from March in terms of both buying and construction. That is because there is too much supply in Mumbai for this segment. But I don’t see the demand coming in so fast and easy,” said Pranay Vakil, chairman, Knight Frank India Pvt Ltd.
The price of these projects starts from Rs32,000 per sq ft. A few projects in this segment are from the Lodha Group (Bellissimo in Mahalaxmi ); Godrej Properties (Planet Godrej near Mahalaxmi Racecourse); DB Realty (Orchid Turf View in Mahalaxmi and Orchid Crown in Prabhadevi) and K Raheja Corp (Vivarea in Mahalaxmi).
During the festival season, especially Diwali, this segment saw a lot of movement because buyers had realised that prices are not going to fall any more and reasoned that it was the correct time to buy. This buying was a release of the pent-up demand which had accumulated over a period of time.
From November 2009 till the beginning of this month, there was a lot of demand from Non Resident Indians (NRIs), because of the Dubai realty crash. These NRIs also decided to bank on Indian property because debt instruments abroad were fetching poor returns. Around 30%- 40% of the demand for these high-value flats were coming in from NRIs. “This time NRIs bought with a little more vengeance than before, because they feared that the rupee would become stronger soon and they may have to pay more dollars to buy these properties. Property-buying was being diverted to India from Dubai,” said Mr Vakil.
However, demand slowed down during the first half of January as Indians consider this period to be an inauspicious time to buy new homes. After February, most NRIs will go back to their host countries, which will lead to a dip in the pent-up demand. Again, there will be greater clarity on the long-term value of the rupee. It remains to be seen how developers will push sales for this high-value segment.
“You will see some (buying) resistance from March in this segment unless the stock market reaches new highs. If this doesn’t happen, I don’t see the same tempo continuing,” said Mr Vakil.