What studies reveal

The calm in the real estate sector has sustained into the first half of the year and unsold stock in Mumbai has given rise to ground-breaking offers for soon-to-be home buyers.

According to the reports of a leading real estate agency of the world, the sale of flats has remained sluggish in Mumbai and other major cities of India. When the comparison is made to the last year, the increase in sales has been only around 1 %. As per the reports of the agency, there are around 1 lac flats which are unsold, though the prices of flats have fallen this year.

The builders have made rosy offers to attract the buyers and to pay a part of the cost of the flats, on the spot. The offers given to the customers are, part of the strategy, and the buyers do good research before buying the flats or booking them.

The real estate in Mumbai, gives such offers to remain in the completion, and also to attract customers.

Inventory management

The builders and the developers at times devolve their inventory for the regular cash inflow. This is done to ensure that the existing business keeps running, as the finance cost is very high. At the same time the the rolling fund is also very high, hence the builders come up with such alluring offers.

The builders are also shrinking up the apartment sizes, and cutting down the prices, which is like switching to more affordable flats. The maximum sales in the current situation of the real estate in Mumbai are of the reasonable housing segment. In the price sensitive market, developers are changing the luxury products to affordable ones.

As per the reports the sale 1 and 2 BHK flats are more in far suburbs area. At the end of the day, the product or the flat should speak for itself, then only the trust of the buyer can be attracted.

New Policies

As per the policies of Real Estate and other financial norms, the sale of real market has further slowed down, under the impact of such policies. The mobilization of finances has slowed down. The policies have slowed down the sale, but gradually, the confidences of the buyers are back. The financial aspects such as GST have increased the rates for the undergoing projects. Hence the buyers are eyeing for the ready products, instead of paying the higher GST.

Reason of slowing down

The main reasons of slowing down of real estate in Mumbai can be the over-ambitious projects, financial indiscipline of the developers. Also the greed plays a major part, when it comes to the reasons of slowing down of real estate.

According to a real estate portal, there are around 3 lacs flats, which are running behind the due date of the delivery in Mumbai. The number of people stuck in the real estate projects, and their mess of finances, is huge in Mumbai. These people are already paying their loan interest, and at the same time, paying the rent as well.

Though getting the possession of the flats, is far fetched reality. It would take much time to bring the delayed sector, back on time. Even the big developers have failed to deliver projects. The brunt of long holdup, poor quality of apartments, failure to deliver the amenities promised and non-compliance with rules and regulation will take a long time to die away.

Home buyers have no choice but to wait till things improve or buy only ready-to-move-in apartments. It is to be seen that the rate or the price is to fall further, if the flats don’t get sold out.

Also the space can be reduced, to put the flats in the affordable section. The new generation, start with buying 1 BHK, for making new entry to the real estate space. All these factors will make difference in future as well. The real estate is a very cynical market, where the prices are very volatile in nature.

The realty sector in Mumbai is seeing its worst patch ever.

When all these factors are accumulated, and going against real estate, we can only expect a nominal return in next decade or so. A low charge yield of fewer than 3% is also a big restriction. Though the experts feel, that, one should invest in real estate for diversification—irrespective of the low profits Real estate as an advantage has lost its sheen (in terms of investment) given the various reforms (demonetization, RERA and GST) introduced in the last two years and especially when other asset classes has been doing very well. So, it’s high time that the builders, pull up their socks, and do something, which will be profitable in the future as well. The policies need to be more stringent.

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