While there’s space for price rise in up market areas, suburbs may see a correction if festive demand fails

 

The festive season is considered an auspicious period for buying a new home. But, this time around, potential home owners in Mumbai are faced with the million-dollar question — to buy or not to buy — even as builders ramped up property prices in the city and its suburbs by 10-15% in the run-up to the festivities, and could raise them further.

  

However, experts recommend a ‘wait-and-watch’ strategy since they expect some clarity on prices to emerge by December. They are of the view that builders raised prices after the general elections in May this year on hopes of speedier economic reforms and that such an action may not be justified in the light of the poor monsoon, which could dampen growth prospects. They feel that prices are likely to bottom out by the end of the year and that even if the fall is as marginal as 5-10%, it may be worth a wait.

  

“Growth fundamentals are not in place and we are jumping the gun already. Lack of strong fundamentals clearly shows that the spike in prices is sentimental and not justified under current conditions,” said Gulam Zia, director, national advisory services, Knight Frank. “Most developers hiked property prices after the formation of a stable government and anticipation of economic reforms. However, the poor monsoon could play spoilsport.”

  

However, even if prices are to soften by the year-end, one of the important determinants that would influence the degree of fall is the supply-demand mismatch in the suburbs. “In Mumbai’s western suburbs, prices could stabilize at current levels or marginally correct in the Bandra - Andheri stretch, as the demand is much higher,” said Ashutosh Limaye, associate director (strategic consulting), Jones Lang LaSalle Meghraj.

  

“If one goes beyond Borivali up to Vasai or Virar, real estate consultants expect some correction in prices. Similarly, even in other central suburbs such as Mulund, Thane and beyond, potential buyers can afford to wait for better deals, as these still are upcoming suburbs.”

  

Big builders such as Nirmal Lifestyle and Lodha are entering newer suburbs such as Dombivali, Dahisar and Kalyan and are quoting higher prices. “These markets, however, are dominated by local developers who are still offering real estate projects at competitive prices. Hence, there is downward pressure on prices in these suburbs,” Mr Limaye adds. Chembur, which was once seen as a posh locality, has slipped in rankings since surrounding suburbs such as Deonar rose to prominence. However, its excellent connectivity to all key parts of Mumbai has kept prices there as high as Rs 8,000-10,000 a sq ft. There is a rising trend of buying used flats in Chembur, according to brokers in the suburb. “There is good demand for used flats in Chembur, because of the high premium on new constructions. Even redevelopment projects have begun in certain pockets within Chembur. So, it’s a sensible buy for potential owners,” says Rakshesh Shah, a Chembur-based agent.

  

Navi Mumbai is a well-planned suburb with superior infrastructure, but prices are expected to soften due to abundant supply. Hence, buyers would have an upper hand in negotiating with builders there. Usually, builders witness additional sales to the tune of 20-30% during the Navaratri - Diwali period, with most carrying out a bulk of their business between October and March. However, if they do not clock impressive sales growth this festive season, there would be a downward pressure on real estate prices.

 

Courtesy:- ET dt:- 14-10-09