Only 1.10 per cent Of Mumbai’s total inventory completed is still unsold. In terms of units, however, the proportion of completed-yet-unsold inventory is only 3.5 per cent of the total – across Mumbai, Thane and Navi Mumbai, says AshutoshLimaye,National Director – Research, JLL India.
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Developers have been left wondering why end-users are not buying into their projects even after offering numerous discounts and schemes. The latter, on the other hand, are playing the wait-and-watch game, expecting prices to go down given the continued slump in sales.
To clear the air, JLL India along with the Confederation of Real Estate Developers Association of India decided to find out what the numbers show. Only 2,600 (or 3.35%) of the total unsold inventory of 77,460 residential units have been completed in Mumbai as well as Thane and Navi Mumbai, according to latest figures.
In Mumbai (MCGM limits) and Thane (TMC limits), only 1.10% and 1.33% of the total unsold units are ready for possession, respectively. Only in Navi Mumbai (NMMC limits), this proportion is higher at 8.13%
The inventory overhang in Mumbai (including Thane and Navi Mumbai) is more than 30 months, according to latest figures.
Comparing the current inventory of completed-yet-unsold units to the corresponding inventory of 3,094 units around the same time last year shows how inventory has, in fact, decreased. However, there is slow absorption due to buyers holding on to their purchase decisions – expecting a price correction in this weak market. It also goes on to show how buyers prefer to buy into completed projects. Also, the market has become largely end-user-driven and investors no longer park funds in residential real estate as the high returns that it was once known for, have considerably diminished.
The sluggish sales could also be due to most of these 2,600 units being priced above Rs 1 crore, which is an unaffordable range for many end-users. While developers may think ticket sizes offered by them are justified, the market seems to think otherwise. While suburbs from Vile Parle to Goregaon have 205 completed-yet-unsold units in the range of Rs 2 crore and above, a major chunk of the unsold units are concentrated in Navi Mumbai. Moreover, units priced below Rs 65 lakhs are situated in emerging areas of Navi Mumbai like Ulwe, Karanjade, Dronagiri, etc., or on the far-away stretches off Ghodbunder Road in Thane.
This indicates a clear mismatch in demand and supply of product offerings. Even though end-users would like to buy in these upcoming areas, they do not. The reason being a lack of social and physical infrastructure – highly needed to attract end-users – in these locations. In such a scenario, developers need to gauge the market sentiment and reduce ticket sizes to align with more realistic prices. They need to redesign the larger flats into smaller unit sizes, wherever possible. Sales will improve if this happens.
Some developers are already adapting to the changing consumer demand. Buyers are put off by poor track record of a developer. Builders also need to realise that buyers will buy into their completed projects and thus, should stick to their construction deadlines and manage their cash flow during the construction phase properly. Data shows that while 18% buyers bought houses in the launch phase, 27% bought houses nearing completion. Even after completion, it takes developers at least two quarters to sell out the entire remaining inventory.