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Mumbai registered abysmal sales in the June quarter, while deals in Pune surged. Pankaj Kapoor, managing director, Liases Foras, says prices have skyrocketed when they should have corrected over the past few months, and this is not sustainable
Mumbai lags way behind other realty hotspots in terms of residential sales. According to Pankaj Kapoor, managing director of realty research firm Liases Foras, only 8.17 million square feet was sold in the city in the April-June quarter this year, against an inventory of 116 million sq ft. But cities like Pune and Hyderabad fared much better.
"Pune recorded sales of 9.47 million sq ft from an inventory of a mere 48 million sq ft, whereas the Mumbai Metropolitan Region (MMR) recorded sales of 8.17 million sq ft against an inventory of 116 million sq ft, which indicates that Pune is a better market than the MMR," Mr Kapoor said.
Mr Kapoor was addressing a well-attended workshop on 'Will real estate prices fall further?' hosted by Moneylife Foundation on Saturday.
In the National Capital Region (NCR) 22.04 million sq ft was sold against an inventory of 224 million sq ft. Mumbai has seen a continuous increase in inventory over the past two years with sales dipping by 10% q-o-q. Average monthly sales between April and June were 2.7 million sq ft.
On the other hand, Mumbai's velocity rate—the pace of property off-take—is the lowest among the metros. The current velocity rate in Mumbai is 1.39%, while for NCR it is 1.76%. Pune is best at 3.01%. "This means that while in Pune it will take only 12 months to offload the inventory, Mumbai will need 40 months," Mr Kapoor said.
Mumbai is also the costliest city to live in. The average price per square feet is Rs9,716, while for Pune and NCR it is Rs3,587 and Rs3,131 respectively. On average a Mumbai flat costs almost Rs98 lakh, way above the price for all other metros, though the area is much smaller.
Sales velocity, Mr Kapoor demonstrated, peaked in June 2009, when the recession resulted in prices going down. However, after that, velocity steadily decreased as prices went up.
In terms of value, Mumbai sales saw a receipt of Rs2,802 crore, while the value of sales was Rs5,046 crore. Delhi NCR's receipts were Rs1,680 crore against a sales value of Rs6,850 crore. Pune, however, beat Delhi with Rs1,798 crore in receipts against sales value of Rs3,381 crore. "We have seen that inventory keeps on piling up. In Mumbai, it has increased 22% year-on-year," Mr Kapoor said. "However, the amount in receipts has steadily gone down. March quarter receipts amounted to Rs3,117 crore."
"This indicates that at current prices, there is no off-take," said Mr Kapoor. "The correction should have come, but prices have skyrocketed instead. The market is becoming more lopsided, and it is hardly a sustainable model."
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Liases Foras founder