Home prices in Mumbai soar 66% over four years: survey

Residential property prices in Mumbai, already among the highest in the world, increased by about 66 per cent over the last four years, contradicting analysts' expectations of a decline, said a report by Jones Lang LaSalle.

Other satellite areas such as Thane and Navi Mumbai saw an even steeper rise in property prices compared to Mumbai's average increase, growing by 70 per cent and 74 per cent, respectively, the report by the Indian arm of the international property consultancy said today.

"Residential property prices in Mumbai have increased steadily after the correction seen post the Lehman debacle. In the period from the second quarter of 2009 to the same quarter in 2013, residential real estate prices in Mumbai have increased by 66 per cent,'' said the report.

Within Mumbai, some locations have risen by well over the 66 per cent average. The Malad–Borivali belt has seen an increase of 85 per cent during the period (the second quarter of 2009 to the second quarter of 2013).

Gurgaon and Bangalore, two of the other hot real estate markets in India, saw increases of 52 per cent and 46 per cent, respectively.

Ramesh Nair, managing director (west) at JLL, said: ''One of the primary reasons for Mumbai's unreal price movements is the limited supply of clear land. Other factors at play are the reduction in new launches over a 1-1/2 year period from the first quarter of 2011 to the second quarter of 2012 - caused largely by a slowdown in approvals for new projects - and the high interest rate scenario in 2010-2011. In this period, the government raised lending rates around 12 times."

Nair further said, ''It is true that going by all known market dynamics, a correction was expected. Lack of affordability over an extended period is a known catalyst for downward revisions in any market category, including real estate.

''Another globally accepted precursor of a property market correction is a surfeit of unsold inventory. If these two indicators would have held true in Mumbai, the city's residential real estate market should have corrected three years ago.''

According to Nair, ''The matter was further compounded by the pressure on developers to give assured return to investors who had bought into their projects at the pre-launch stage. This, along with the increasingly high cost of debt, brought about a massive liquidity crunch, which limited the developers' capability to purchase massively priced land parcels and launch new projects.''

The demand for investment in residential properties and end-user homes over the past four years has remained stable, said the report.