Demand for residential realty, both rental and outright purchases, will continue to rise, prompting developers to launch new projects across the city While it is still a far cry to equate Mumbai with Shanghai in terms of aesthetics and infrastructure, the country’s financial capital is home to several big corporations and financial institutions. Mumbai’s large and variegated commercial demographics attract inward migration from all over India.
Besides, being the archetypal ‘City of Opportunity’, Mumbai generates an unparallel demand for properties. The realty market in Mumbai attracts huge foreign investments, boasts of a vast customer base and a quality workforce.
Growing urbanisation, limited space availability in the central metropolis, along with the aforementioned factors are constantly triggering the city’s property demand and extending the real estate boundaries into newer areas.
 Challenges and outlookThe biggest impediment for Mumbai currently is its chronic infrastructure deficit, which needs to be addressed soon. While the government can contribute significantly to fill up the gap, much also depends on developers, who need a more progressive view of the future directions that the city’s urban spread must take.
Nevertheless, the upcoming infrastructure projects—metro, monorail and flyovers—will enhance accessibility within the city and reduce time taken for commuting. Undoubtedly, this is good news for the Mumbai property market in the mid-to-long term, although much depends on the speed of project implementation. Still, the demand for residential realty (both rental and outright purchases) will continue to rise, prompting developers to launch new projects across the city.
Rental vs. ownership
Considered as dynamic sides of the same coin, both rental and ownership properties drive the residential market of Mumbai.
Rental properties: A 20-million pluscity, Mumbai constitutes a vast migrant workforce, who will eventually return to their respective homelands. Therefore, this segment does not wish to settle down in the city, creating a huge demand for rental apartments. In addition, the skyrocketing property prices make it completely impossible for a large segment of this migrant population to own a property in Mumbai. South Mumbai witnesses an enormous demand for leasehold properties, since major business activities are located in this part.
However, rental affordability is still an issue in Mumbai, especially in the more centralised areas, as the annual income on rental returns for property owners hover around a meagre 2.5-3.5%, despite capital appreciation.
Outright ownership: Mumbai also witnessesa perennial demand for owned properties among a community that has an incessant craze to own a property and is able to cater to the investment potential of the city’s high appreciation rates. Amenable home loan interest rates, coupled with development of increasing number of suburbs in terms of connectivity and social/general infrastructure, is prompting more and more residents to enter the residential market at a relatively affordable level.
However, the major problems pertaining to outright ownership are as follows:
Indian real estate, 2010-11 outlook
Robust demand is expected to keep the Indian realty market, especially the residential segment, buoyant in 2010-11. Therefore, residential realty (comprising affordable housing and luxury apartments) has emerged as the key area of focus for most developers who wish to get on the public funding bandwagon. Increase in sales is expected to push the residential prices northwards.
In addition, the commercial and retail market will also witness surge in transactions in 2010, both in terms of leases and outright purchases. However, pricing will be under pressure owing to new supply.
Pawan Swamy, managing director (West India) of Jones Lang LaSalle Meghraj (JLLM) |
