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Realty sector to see oversupply in 2012-13

Shalini Nair The Indian Express

March 29, 2011


Mumbai's residential market is predicted to witness a glut in 2012-13 owing to steady new launches at a time when sales are extremely slow, according to real estate consultancy Jones Lang LaSalle.

“The overall sentiments of the market and the consistent rate of new project launches in Mumbai give a clear indication of an impending oversupply by 2012. A lot of developers in the most severely affected locations are currently open to closing sales at lower rates,” said a note by JLL.

It points out that bouncing back from the economic slowdown-induced realty slump in Mumbai in early 2009, the rates started rising swiftly until the end of 2010. During this period, a total of Rs 20,000 crore was pumped into land acquisition by developers in Mumbai, Delhi and Bangalore. Of this, Rs 12,000 crore was spent in Mumbai alone, leading to high land valuations and inflated rates.

Also, due to the prolonged slump in the commercial realty market, developers focused on the residential market. “Over the past 12 to 14 months, developers from Mumbai and Delhi started focusing on their home markets and launching a substantial number of residential projects. Land was bought at expensive rates and if sales continue to remain dull for longer, there would be a 15-25 per correction,” said Sanjay Dutt, CEO (business) at JLL India. Dutt added that of the total recent residential sales about 65 per cent flats in Delhi and 35 per cent in Mumbai have gone to speculators. These flats are also expected to roll back into the market.

According to JLL, real estate prices have already dipped in Parel, Lower Parel, Mahalaxmi, Bandra east, Andheri east, Goregaon east, Kurla and Mulund. The agency points out that after surpassing the peak values of 2008 by 20 per cent by way of correction, the property rates have now slumped back to peak 2008 levels.