If you’re planning to sell a property in Mumbai, India you will have probably noticed how buyers are simply refusing to buy an apartment in the city because of the unrealistically high costs.
Yes, Mumbai, property market is a victim of its own success. Prices have risen so high that many buyers have been priced out of the market. So there is stagnation in the housing market in Mumbai with buyers refusing to buy and sellers refusing to sell at lower prices.
As a result, at least 35 percent of the apartments in the city remains unsold, for want of buyers. Take for example a 700 sq. foot apartment in a Mumbai suburb, around 45 km from the heart of the city. It can cost anywhere from $230,000 to $250,000, twice as much as a similar apartment in New Delhi and thrice as much as a comparable property in Bangalore or Chennai.
Mumbai, make no mistake, is prohibitively expensive for most city dwellers. But then, this is nothing new. Mumbai has always been the most expensive city in India. Real estate prices here compare with those in cities such as Dubai or Hong Kong.
There are a number of extremely rich individuals in Mumbai – industrialists, film stars, CEOs, investment bankers, etc., who are capable of making huge investments in property.
An Indian industrialist, for example, spent $115 million on a 50,000 sq. foot property at the heart of the city. Movie stars and cricketers are known to buy apartments for $5 million and more.
What such purchases have done is to skew the property market in Mumbai in favour of the top 1%. As Vivek Talwar, a real estate investor, explains, "These are one-off deals by billionaires who can afford it, there is no depth in the market. For most people, the cost of real estate is unrealistic, compared to what they earn. Today customers are not running after anybody, you have to offer around 15-20 percent discount to get a deal done.”
As a result, apartment owners find it hard to sell their properties at such high prices because of the complete refusal of buyers to participate in the market. If any apartments are being sold, those are in the range of $45,000-$65,000, sold in the outskirts of the city.
Another seller, who wanted his name to be withheld, said that he had been trying hard to sell his ancestral property, a three bedroom houses, in South Mumbai. He is even willing to offer a massive discount on it. But he is yet to find a buyer.
Colliers India, a real estate firm says that there are 180,000 unsold apartments in the Mumbai metropolitan area. Such a high amount of unsold inventory is having a strong effect on the market and is bringing the prices down, whether developers like it or not.
Arvind Kapoor of Colliers India says, "In the first six months of the year there has been a 40 percent year-on-year drop in new launches.It’s a tough market. Even though builders may not be giving discounts openly, behind closed doors, negotiations are on."
Rajan Ahuja, a top real estate agent in Mumbai agrees, "The buyer is king, he is dreaming of getting everything free. For example, today a buyer expects to get an apartment priced at 70 million rupees [$1.1 million] for rupees 50 million [$760,000]."
So normally when nobody is buying property because of high prices, one would have expected the apartment prices to come down. But that is not happening because most home owners have bought their properties at high rates and are unwilling to sell them at much lower price than the one they bought it for.
The question is who will blink first – will it be the buyer who would purchase the property even at a high rate, or will it be the seller, who would agree to sell at a lower rate.