Mumbai's Housing Shortage is Pure Hogwash

The hype about Mumbai 's short supply of apartments and heavy demand has proven to be nothing but builder hogwash. If you plan on investing in homes, just hold your horses. This June, home prices in prime Mumbai suburbs are expected to fall further.

I just got back from a meeting with a broker, for an apartment in Santacruz (Mumbai). The meeting was like a breath of fresh air. A first-hand experience of the fact that prices for homes in Mumbai are actually tapering off. In fact, they are down 20% for certain. The current rack rate is Rs 14,500 per sq ft in this area. It's a nice flat on the higher floors of this building. This is in the prime suburbs of Bandra and Santacruz, and not Mulund and Bhandup, the eastern suburbs, where one can be sure that they have fallen at least 30%.

What was a bigger relief is that when I asked for the topmost floor, there was the usual story of this being taken up by managers of one of India's largest private banks, and the fact that there was a 50:50 chance that they would be available for purchase. This is a clear indication that home investors booking easy loans are moving out of the market?

The same broker was offering to show me excellent grade-A apartments on Peter Dias Road, for Rs 18,000-20,000 per sq ft in Bandra (Mumbai). This is in the same suburb where an aquaintance, who I met last week, was saying rates had shot up to Rs 40,000 per sq ft. He had picked an apartment for Rs 80 lakh in 2004, and was offered Rs 4 crore about two months ago.

In Bandra, the housing rates in 2002 were about Rs 6,000-7,500. They had almost tripled in 6 years. This actual tripling happened in the last 4 years, while before this rates had been slumping for almost 6 years. It appears that the down cycle has started once again.

In 2002, an apartment in Mahim, which is on the northern edge of South Mumbai, a km south-west from Bandra, rates are hovering at Rs 12,500-14,000, whereas in 2002 they were between 4,000 to Rs 5,500.

We had seen in the month of March and April, a kind of limbo, where sellers were not willing to succumb to lower rates and buyers were hesitating to buy. The stalemate has now been broken, and sellers have blinked first.

This monsoon, real estate in Mumbai is certain to cool further.

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