‘Property Registrations in Mumbai Fall 11% in Feb’

Small discounts fail to work; buyers hold back on hopes of rate cuts

Property registrations in Mumbai fell 11% year on year in February, as consumers continued to shy away from buying homes and offices. However, developers can draw some relief from the fact that the absolute number of registrations rose to 4,203, which is relatively higher than the bottom of 4,060 witnessed in November 2011. 

Property sales dipped 19% in the island part of Mumbai, while suburbs saw the number fall 9% from a year ago, according to a report by the broking firm Prabhudas Lilladher. In the month, the number of lease transactions grew to 8,515, up 6% from a year ago. However, no offer or incentive scheme seems to be working as outright sales numbers remain weak. Market experts expect this to improve with new launches starting around Gudi Padwa — considered an auspicious time for new purchases — later this week. 
Developers are also pinning their hopes on new launches and are expecting a revival in sales volume on hopes of interest rate cuts by the Reserve Bank of India soon. But many of them are not sure if anything other than a price cut will work. 
"Sales volume has been falling for over a year and a half now, it's scary. It clearly indicates that developers will have to cut prices across the board now, and announce it than making it customer specific," said Ramesh Nair, managing director - west, Jones Lang LaSalle India. 
Although some prospective home buyers are waiting for an interest rate cut, price correction will be the most feasible factor that will attract customers, he said. However, developers do not seem to be convinced that prices can be reduced now. "Given the various proposals in the Union Budget, construction cost will go up by 5%. Apart from this, there is the additional burden of service tax, all of which will be passed on to the consumer. Not much of supply is also likely to hit the market as approvals from various committees and departments are still taking time," said Sunil Mantri, chairman, Real Estate Committee of Indian Merchants Chamber. 
Following the clarity emerging on amended development control rules in January, new launches have started gaining the momentum. However, most developers are in the process of submitting revised project plans to the civic authority to take advantage of new fungible floor space index. This may affect execution at these projects for some time as approvals under new DCR would take at least three months, acting as a further dampener on sales, said Kejal Mehta, real estate analyst at Prabhudas Lilladher. 
Developers have almost failed to attract home buyers in Mumbai, the country's biggest property market, with marginal price discounts and other incentives as they are deferring their decision to buy property in the anticipation of an interest rate cut. In January, property registrations had declined 13% from a year ago to around 4,427 in Mumbai, after witnessing a spike in December to 5,900, led by higher transactions in the secondary market. 
kailash.babar@timesgroup.com