Posted On Friday, April 29, 2011 at 03:22:59 AM

Unsold housing stock in Mumbai has crossed the 100 million sq feet mark, the highest ever in a city, brimming with people looking for homes. While prices haven’t dropped yet, experts say it’s only a matter of time
Here is some good news for those planning to buy a house in Mumbai and not-so-great news for builders trying to sell.

A survey by property research firm Liases Foras has revealed that the unsold housing stock in Mumbai Metropolitan Region has crossed the 100 million sq feet mark - that’s close to 93,000 housing units.

Mind you, the number refers to only new houses and does not include those up for resale.

According to figures collated from 2,000 residential projects across the city, 105 million sq ft of residential space remained unsold as of March 2011. This is a leap of more than 35 per cent from March 2010, when 68 million sq feet was unsold.

Pankaj Kapoor, managing director, Liases Foras, said such demand/supply imbalance is unsustainable in the long run. “The figures point at a completely off-balance state of the real estate industry.

If you look at the bigger picture, the potential demand for homes in Mumbai as of today is 2 million units. Despite this, the unsold stock is so huge. No market can sustain in this state for too long,” he added.

Experts say it will take at least two years and eleven months to exhaust this supply at the current rate of consumption.

Only 9.1 million sq feet of residential space was sold between January and March in Mumbai. That is 2000 projects in the city together managed to sell only 3,100 units per month. “What also needs to be factored in is that 20 per cent of these 2000 projects accounted for almost 80 per cent of sales,” Kapoor said.

In March 2010 only 68 million sq feet was unsold

While builders are putting up a brave front, the fact is that the slump in sales has hit them hard. While there has been a drop of 14 per cent in the residential space they have managed to sell in January-March compared to sales of October-December, the money made by builders has dropped by 27 per cent - from Rs 7,862 crore then to Rs 5,748 crore for the same period.

Real estate industry watchers assign two reasons for the ballooning stock of unsold houses - unreasonably high prices, and rising home loan interest rates.

Experts believe a downward correction in prices is now due, though it may not be substantial. “Even if sales have dropped drastically, I don’t see a correction of more than 10-15 per cent in the next three to six months,” said Ambar Maheshwari, head of investment advisory, DTZ, an international property consultancy firm.

Kapoor, however, insists a correction of 35 per cent is essential for demand to pick up.

Source: Mumbai Mirror dated April 29th, 2011