Mumbai’s real estate market is a curious case. For years it is being vehemently opined that Mumbai’s real estate market has saturated and property prices will cool down. Standing today, one can clearly see that it is far from being so. Despite unsold inventories following muted demand in post-financial crisis period, Mumbai property market continues to rule the roost and command prices that squarely put it on the map of the most expensive cities in the world.
While trying to break the code of this mystery, I realised that it is actually not an aberration. The core reason for Mumbai’s ability to buck the trend is it’s being the financial hub of one of the world’s rapidly growing economies. In a trending social culture, Indian citizens are moving out and away from their homes for better jobs as well as lifestyle. Here, Mumbai dominates the popular choice. Being the country’s business centre, both options for employment and chances of better pay are more, especially at a time when employment market continues to remain slow.
Another big reason is the boom in infrastructure that the city has started seeing. Being an island city, it was considered for long that the Mumbai can only sustain vertical growth. Hence, while tall towers became life preservers, the famous local train network became the lifeline of the city. Focus on road connectivity continued to dwindle. But in the last 7 years, efforts to improve the transportation network gained ground with better-conceived flyovers, elevated roads and crossover metro rail lines which have significantly reduced commuting time. This had a direct effect on the demand for real estate projects which came up in areas hitherto considered unrealistically long distance from the city centre or as referred locally, ‘town’.
At the same time, by virtue of being an island city, the scope of development of real estate continues to be linear in nature. This limits the supply for a metropolis which is a witness to a constantly growing population and, resultantly, growing demand.
Another important reason is Government policies which have been bolstering property prices. Over the last few years, the state government has been raising the ready reckoner rates which go on to determine the floor price. The increase in this regard by Mumbai, along with Delhi, is the highest in the country.
Then of course, there is the power of monopoly. As per reports, a handful of builders own approximately 70 percent of the transferable development rights in Mumbai. These developers resort to higher ticket prices to meet government pay-outs and debt obligations. If we go solely by the current debt obligation of the realty sector, prices of Mumbai real estate market will be continue to aim for the sky.