Mumbai property prices plunge up to 40%, courtesy RERA

Land auctions conducted by the City and Industrial Development Corporation (CIDCO) in Navi Mumbai last week saw bids lower by as much as 40% compared with those in November. Market watchers say land prices in several parts of the Mumbai Metropolitan Region (MMR) have started to trend down with the Real Estate (Regulation and Development) Act having limited developers’ ability to fund land purchases with advance payments from customers.

Compared with a price of around Rs 1.15-1.25 lakh per square metre back in November, prior to demonetisation, bids this time around ranged between Rs 65,250 and Rs 96,000 per sq m. Ashutosh Limaye, head of research at JLL India, told FE he expected activity levels in real estate would remain low for the next eight months.

CIDCO is selling six commercial plus residential plots in New Panvel, with plots covering an area of 6,000 sq m. The Neelsiddhi Group acquired three plots — two at Rs 65,250 per sq m and one plot at Rs 76,000 per sq m. The Millennium Group acquired one plot at Rs 80,000 per sq m, while two plots went to the Satyam Group at Rs 77,000 per sq m and Rs 96,000 per sq m.

Manohar Shroff, vice-president, MCHI, Navi Mumbai, believes RERA is the primary reason for the bids having come in at such low levels. Demonetisation, per se, hasn’t really affected purchases of land and its value, he pointed out, since developers need to make payments to CIDCO via cheque.

“The builders’ ability to fund these land purchases has been curtailed thanks to RERA. The project plans need to be approved by the relevant authorities before the developers can accept bookings. And before the plans are submitted, CIDCO needs to be paid the full amount,” Shroff said.

Launches in the residential segment fell by about 8% in the year to March 2017, Cushman and Wakefield reported. The markets are off to a slow start with April and May seeing lukewarm sales, experts said. While some of this is due to the lingering effects of demonetisation, the markets are expected to remain dull for another six months due to the rigours of RERA.

In fact, near-term pain in the sector will be unavoidable, with no easy transition. K Ravichandran, group head, (corporate ratings), Icra, pointed out that since registration with RERA is now mandatory, any delay in setting up regulatory infrastructure could impact the operations of real estate developers, especially in case of new project launches.

------By: Shubhra Tandon | Mumbai