Mumbai home sales in August dropped to a 27-month low as higher interest rates and home prices crimped demand, according to brokerage Prabhudas Lilladher Pvt.
Registered sales declined 25 percent to 4,611 units last month from a year earlier, Kejal Mehta, an analyst at the brokerage, wrote in a report dated Sept. 19. Sales in Mumbai’s suburbs dropped 26 percent, while transactions in the city slid 22 percent, she said.
Rising borrowing costs are prompting Mumbai residents to defer purchases, the brokerage said. India’s central bank has raised interest rates 12 times since March 2010. The Reserve Bank of India increased the repurchase rate to 8.25 percent from 8 percent on Sept. 16.
“The data for August reaffirms the downtrend in sales the city has been witnessing for the last one year now,” Mehta said in the note. “We believe that lower affordability on account of higher interest rates will continue for a while.”
As property prices continue to defy gravity, sales are likely to worsen in the absence of a favorable change in the buyer affordability dynamic, Mehta said.
Lease volumes rose 4 percent from the same period a year ago, Mehta said. Lease registrations in August climbed to 8,102 units from a year ago, according to the note.
Registration data is a lagging indicator of demand as properties are registered two to three months after the actual purchase.