Mumbai’s residential sales dropped to a 30-month low in the quarter ended June as record home prices and higher interest rates crimped demand, according to Liases Foras Real Estate Rating & Research Pvt.
Sales in Mumbai, India’s most expensive property market, fell 11 percent from the previous quarter to 8 million square feet, the lowest since the three months ended December 2008, said Pankaj Kapoor, founder of Liases Foras. The number of unsold homes also rose to a record, he said.
“This clearly shows the inefficiency in the market, that the developer will have to lower prices to increase sales,” Kapoor said in an interview in Mumbai yesterday. “The market has become off-balance.”
India’s central bank, which has increased rates 11 times since March 2010, may add another half a point to the benchmark borrowing cost by the end of 2011, the median of 11 estimates in a Bloomberg News survey showed. The bank increased the repurchase rate to 8 percent from 7.5 percent on July 26.
Mumbai land prices may fall as much as 30 percent over the next year as higher borrowing costs force some indebted developers to sell real estate, Oberoi Realty Ltd. Chairman Vikas Oberoi said. He expects a “cash crunch” within the real estate industry with higher interest rates.
The Bombay Stock Exchange’s Realty Index declined 2.5 percent as of 1:51 a.m. in Mumbai to the lowest since June 29. The benchmark Sensitive Index lost 1.4 percent.
The city’s unsold inventory climbed to 40 months, according to Liases Foras, a Mumbai real estate research company whose clients include Housing Development Finance Corp., India’s largest mortgage lender. A healthy market normally maintains about eight to 10 months of inventory, according to the report.
Unsold stock climbed to 108 million square feet, while the weighted average price of homes increased to a record 9,716 rupees ($220) a square foot. Unsold stock represents unsold units of projects that are being marketed, Kapoor said.
Mumbai home-sale registrations fell to the lowest level in two years in June as higher rates and home prices curbed demand, according to broker Prabhudas Lilladher Pvt.
Sales in Delhi and its surrounding areas declined 19 percent to 22 million square feet in the quarter from the previous three months, while unsold units are at a record 220 million square feet, Liases Foras said.
The weighted average selling price in the capital city rose to 3,131 rupees a square feet, 17 percent higher than the March quarter, Kapoor said.