An NRI who had invested INR 9.15 Crs. in an under-construction apartment in Trump Towers- Worli, Mumbai back in 2013, recently sold it at INR 8.6 Crs. One may shrug this as a one-off distress sale, but such deals are more rule than exception.
From being on steroids, courtesy, the politico-administrative and underworld’s bonhomie during the ‘80s to rendering negative returns post 2012, Mumbai’s real estate prices have fallen victim to deurbanization and free market capitalism.
South Bombay (SoBo) – investors’ bygone crown jewel, today is staring at a 13% decline in apartment value making it the most underperforming pocket across Mumbai Metropolitan Region (MMR). While rates of properties across the rest of MMR are stable or on an upward trajectory, they are still trailing inflation rates (source: CRE market research – June ‘24). Not to mention the capital erosion of ~ 11 % on account of stamp duty, registration and brokerage (if any) putting the real estate v/s equity investment debate to rest.
Not surprisingly, dispassionate savvy home seekers, despite holding the ability to buy, are preferring to live as tenants while investing their money in better yield pastures.
Brand SoBo – Haughty no more! !
Rechristening Wadala as New Cuffe Parade may be stretching it too far. However, the unlocking of land banks giving way to high rise complexes has lent a glamour quotient to areas viz. Sewri, Wadala, Parel and Byculla. Thanks to some clever marketing intended to blur SoBo’s boundaries, these erstwhile not- so-desirable areas are now turning out to be a compelling option for those able to stretch their budgets beyond peripheral cities viz. Thane and Navi Mumbai.
In a complete departure from earlier trends, real estate prices are no longer a function of locality anymore. To exemplify, Lodha Cullinan in Versova (Andheri) boasts of a price tag of INR 21+ Crs. for a 4BHK ( @ ~ Rs 50K/sq.ft.).
In any case, Mumbai suburbs are pipping the island city in property price appreciation.
The health of a country’s economy (barring the likes of Singapore, where land is genuinely scarce) is inversely proportional to its metros’ real estate prices
Case in point, while Mumbai properties are losing sheen, prices in Islamabad are going through the roof. That because, while the introduction of a regulatory framework (RERA) and awarding Floor Space Index (FSI) generously to redevelopment projects are keeping shenanigans and price escalations in check, Pakistan’s skewed tax system incentivizes the elite to invest in urban property rather than investing in more productive sectors. Also, long term capital gains (> 6 years) are untaxed. So much for democratization of wealth.
The union budget – playing catalyst
On the other hand, take for instance the LTCG tax announcement in India’s recent union budget. If one dwells deeper into its nuances, it gives a fillip to non-urban development. Under the new tax regime, a double-digit appreciation on reinvested property will qualify the investor to save up to 19% in tax. Now, given that delivering double digit appreciation is out of league for most metro properties, this tweak in budget in-effect encourages flow of investments towards non-urban developments.
So making a beeline for this opportunity are proactive developers like Lodha and Rustomjee who are betting big in Goa and the bullet train corridor respectively.
Notwithstanding all the above, there is one sentiment that will always keep property prices buoyant – ask any eligible Indian bachelorette’s parents and they will paraphrase .. “A property is forever!!