Will rates of Mumbai’s luxury properties come down?

Recently the state government has withdrawn its controversial notification to exempt certain builders from paying a hefty premium to the BrihanMumbai Municipal Corporation (BMC) for building extra areas. The reason behind its withdrawal seems to be the loss of several hundred crores that the BMC would have incurred.  

 


Earlier, the State government had waived off the heavy premium for those builders who have started construction of the project before January 6, 2012. This premium was equivalent to 60 per cent of the ready reckoner rate to be paid to BMC for constructing extra areas, used for building swimming pool area or sundecks. As this cost component has been removed, industry experts are anticipating it as an opportunity to revive the realty market of South Mumbai.

 


Research reports indicated the rising stock of unsold inventory in the island city might lead to a fall in property prices to attract buyers. Ideally, sensible developers should try to sell off the unsold stock as much as they can initiate newer projects.

 


Even the trend watchers had shown positive sentiments regarding price cut. "Given the market and demand/supply ratio, sensible developers would have lower the costs to discard the cost component of Fungible Compensatory FSI so as to attract buyers. The main objective would be to sell off the inventory and bring up more such projects. It does not make sense for them to keep the prices high, even if the targeted buyers can pay extra for a luxury project," says Ashwinder Raj Singh, CEO – Residential Services, JLL India.

 


This move by the State government could have been a boon for developers in Mumbai to kick-start several stalled luxury projects at Napean Sea, Worli and Prabhadevi. Most of these projects are from renowned builders of the state.

 


Now, as BMC officials have said, they will be studying such projects on a case by case basis now. If there are violations, the developers will have to alter or rectify them.

 


Will this impact the booming luxury market of Greater Mumbai? Areas like Bandra West, Bandra-Kurla Complex and Andheri West are the emerging destinations for luxury lovers in Mumbai. Luxury is cheaper here as the property which would cost Rs 25 crore in South Mumbai, will be available here for Rs 12 crore in BKC. Also investors have lost faith in the SoBo luxury projects as they were stalled for over three years now.

 

                                                                                                                                            
However, as the Island city market is still flooded with problems, it would be interesting to watch whether the noveau rich would still crave for SoBo properties or enjoy the new age exclusivity at Greater Mumbai.

 

Source: Magicbricks.com dated June 8, 2015