Reality or a bubble- South Mumbai

Reality or a Bubble- South Mumbai

I have analysed the property market of South Mumbai, an area which the most lucrative for real estate companies. The present scenario looks opportunistic but the future of real estate in South Mumbai looks bleak because:-

•The real estate deals in terms of volumes are at all time low(specifically in South Mumbai)
•Real Estate Brokers are finding it difficult to survive, are frustrated at the cartel of builders and investors who are not allowing the rate to go down.
•New projects, when launched, are getting sold in volumes by builders to investors, A lot of money laundering practice have been undertaken during these bulk sales. These investors get a significant discount too.
•The remaining units are then sold at a 50 % premium in the market.
•Due to these practices many properties are unsold for a long time.
•Old depleted buildings and chawls of Kalbadevi and Khetwadi per square feet rate is between Rs. 20,000-32,000 which was quoted in Walkeshwar & Kemps Corner last year.

For Instance
A project initiated by a reputed developer in South Mumbai has told that the project is 50 % booked and the flats are available from only 27th floor onwards. Only 3BHK are available with an area of approx 1715 sq. ft and approx 2255 sq. ft. and the construction is expected to begin in October 2010. The rate on first enquiry is quoted at Rs. 35,000 per square feet on super built-up basis. If an individual would negotiate with the builder then the property could be available at Rs 25000 per square feet. There is a reduction of 20-30% reduction and the cost incurred could be Rs 3.5 Crores, this entices the developer to make a sales pitch which would be termed as a “luxurious living “

Infrastructure of South Mumbai- Present Situation
•Water Logging during rains
•Many Old buildings (danger status given by BMC)
•Small lanes( C.P.Tank) (rigged real-estate prices which are community driven)
•Un organized Markets( Vegetable market)
•Infrastructural Disparity is high between a radius of 1 kilometre
•Inadequate Facilities offered by developers in South Mumbai
•Slow Redevelopment Initiations by existing Corporative Housing Societies who are incorporated since 50 years

The real estate market in South Mumbai is similar to the capital markets where prices are rigged due to herd mentality and a few players have benefited from it and has made it difficult for the common man to exist in the area. Once the Bull Run would end a significant correction is anticipated. Whether the correction would be led by a government-induced curb on prices? or on a high supply-driven curb, It would be interesting to know how long the bubble would persist.