Come 2016, the prices of residential real estate may increase, says a report by JLL India. The report says there has been a 28 per cent rise in home sales in the city but a 26.5 per cent drop in new project launches in the first six months of 2015. Experts believe that if this trend continues, demand and supply ratio may scale up prices for potential residential home buyers.
The report states that aggregate of residential unit sales in the city in the previous four quarters has jumped up 28 per cent when compared to the corresponding period one year ago. This shows improvement in an otherwise lacklustre market.
“Things have started looking up again for Mumbai’s realty with the current uptick in sales. This increase could be attributed to fence-sitters having realised that a price correction of sorts has already happened,” said JLL India Chief Operating Officer Ramesh Nair.
The report also mentions new launches are down 26.5 per cent in 2015 as compared to 2014. It says that as new launches reduce, supply goes down and subsequently, we may see increase in prices in the next two or three years.
Residential Research Head, JLL India, Ashutosh Limaye, says, “It is a fundamental principle of economics that if demand increases and supply decreases, there are chances of price increasing in the coming days. However, one of the reasons for demand increasing is that buyers this year have been given enough discounts and various options for paying cost of flats.”
The report further says that the government has introduced new types of taxes like Local Body Tax (LBT) and hiked stamp duty, ready reckoner rates and development charges. Radius Developers Chief Operating Officer Ashish Shah says, “The conditions after stamp duty and development charges are going to directly or indirectly affect buyers. The government should create a healthy atmosphere for developers by decreasing taxes and speedy approvals to maintain supply so that demand is handled accordingly and there is no major increase in prices in the residential sector.”
The JLL India report also states that there could, in fact, be a scenario where prices start appreciating gradually if project approvals continue to take longer and developer’s costs keep escalating. Also, for prices to come down in Mumbai, connectivity from the city centre to peripheral areas needs to be improved.
However, Managing Director of Liases Foras ,a real estate research firm, Pankaj Kapoor claims, “I do not think prices may go up as we still have more than four years of supply stock at current pace of sales. I feel prices will continue to have down side pressure for the next 12-15 months. Slight improvement in sales is not good enough for prices to go up.”
