Mumbai:India's financial capital Mumbai witnessed a decline in residential property prices for the first time in a decade a year ago following a crackdown on undeclared cash, new consumer protections and the roll-out of a nationwide sales tax, according to Knight Frank.
Knight Frank report also highlighted that the share of affordable homes among new projects rose from 53 percent in 2016 to 83 percent in 2017 indicating developers' focus towards properties within Rs 50 lakh price bracket. Prime Minister Narendra Modi is spearheading a campaign to wipe out the shadow economy, boost tax compliance and widen the revenue base.
"At the end of 2017, India's residential sector appears to have shrunk to a fraction of its size in less than a decade".
Das said that price correction downwards would be more pronounced in the coming months.
The good news is that the weighted average residential prices in the city contracted by 5% in 2017 y-o-y.
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Das said that "in terms of sales, the Mumbai market recorded 19% uptick in H2 2017 over the demonetisation-hit same period a year ago, however overall sales volumes reflect a declining pattern".
The report presents analysis of the residential (across eight cities) and office (across seven cities) market performance for the period July-December 2017 (H2 2017). While 3.68 lakh apartments and houses were sold in 2011, only 2.28 lakh units were sold previous year. Flats are effectively being offered at a discount of 11-12 percent on the original price. The Chennai residential market, as of now, holds inventory to sell over the next 18 months. It said Pune saw a 7 per cent drop, while developers in Bengaluru and the National Capital Region cut prices by 5 per cent and 2 per cent, respectively. It is also for the first time that prices have dropped by 7 per cent with an effective price difference added with discounts which add another 12 to 13 per cent.
"The pace at which developers align themselves to the new regulatory norms and launch new products in the right ticket sizes that appeal to the homebuyer's interests will determine the trajectory of the market going forward", said the report.
"Ready to move in category seems to do better when it comes with a brand assurance and a developer with a good record, and the second half of 2017 has shown that the real estate market in Pune is in fact a consumer's market and the best time to invest in real estate is now", Paul said, adding that what an investor should be really looking at is that execution of the project, strong track record of developer, and depending upon the need, it is advisable to buy or invest in a property.