Forecast of 2012 Mumbai Real Estate Market

Published: 14th May 2012
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Buyers aren’t expressing any interest in projects that are perceived to be overpriced and this trend will continue throughout the first half of 2012.

Real Estate Investment:

Year 2012, Mumbai underscore its status as a relatively safe haven for Indian real estate. High Networth Individual (HNI) investors will re-enter market in a big way and increased HNI investment volumes are likely to put pressure on core cap rate. Market could see the short-run fluctuations as investors alternate between seeking out more risk and briefly pulling back.

The debt capital availability is likely to increase the core investments in financial capital; however financing challenges will continue for high-risk, opportunistic real estate investments.

There is every indication in 2012, a number of distressed residential property of Mumbai by smaller developers will be acquired by large and medium-sized developers at sub-valuation prices. Few developers are gearing up to sell their non-core land and divest their stakes in non-core business such as hospitality and retail.

Retail Real Estate:

Mumbai’s retail real estate looks buoyant (bright) in year 2012. we’ll see some of the cities older malls being repositioned, re-tenanted and refurbished. The vacancy level will increase in several poorly-designed and unfavourably located malls. The redevelopment of several old residential societies in the Island city will give rise to an unexpected availability of more high street retail space. Store-within-store formats, drive through lanes and pick-up zones will be implemented in 2012.

Commercial Real Estate:

Those who thought 2011 was a discouraging year for Mumbai’s office space market, so do 2012 will not bring any obvious reasons for cheer. The demand is marginally lower than in 2011 with IT and ITES companies becoming even more cautious on account of the expected reduction in IT spend by US and European companies. Uncertain economic environment will continue leading to reduced employment growth and therefore lower the fresh commercial property absorption. The tighter lending standards for commercial construction will not help either.

On the brighter note these market conditions will continue to favour tenants in most of Mumbai’s micro-markets by ways of a larger bunch of options, rational pricing and various concessions. The real estate market conditions are optimal for consolidation and relocation and many Mumbai-based occupiers will avail of this option throughout 2012.

Rentals of commercial property in Mumbai will show a further though marginal drop in the first half of the year as infusions of additional stock lead to higher vacancies. Also demand for smaller offices in Grade A projects is expected to increase as more small and medium sized Indian corporates take advantage

Residential Real Estate:

Real Estate market set to the deepest by the second quarter of 2012, will see the beginning of a recovery in the Mumbai city’s residential real estate fortunes by the second half of the year. There is very little scope for appreciation in under-construction residential projects. Unsold under-construction stock will increase significantly. A lot of scope for strategic pre-launch bulk investment deals by High Networth Individuals (HNIs) who can predict where the market will head later in the year.

In current scenario, buyers are not expressing any interest in residential property of Mumbai that are perceived to be overpriced and this trend will continue throughout the first half of 2012. Mumbai’s residential market will be more or less sustained by the sale of an affordable priced mid-income apartments. The absorption will be driven by both end users and HNIs investors.

On the other hand, the completed high-end properties will become costlier by mid-year largely because of reduced supply in this segment. The reduction of interest rates expected by the second half of the year will help kick-start a generalized though cautious recovery in demand for residential property in Mumbai leads to increase in new launches. HNI investors would have perceived the trend and already parked their monies in advantageously located residential projects by well funded developers.

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