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Is this the Right Time to Invest in Mumbai’s Property Market?

The Indian real estate industry is reeling from a constant down. The first quarter of 2020 saw a massive decline in the sale of residential units with the global pandemic altering preferences and surrounding buyers with numerous uncertainties regarding the future. India’s property sector accounts for 6% of GDP and plays a key role in the economy of the country, and is the second-largest employer in India.

Suffering blows from the slow economic growth already, the arrival of COVID-19 worsened matters. However, things are finally looking up as life is returning to normalcy. Known as the country’s costliest real estate market, it may come as good news to some that property prices in Mumbai have begun to decrease. The industry is trying hard to recover from the liquidity crunch that witnessed a drastic jump due to the pandemic as developers are offering discounts.

Apart from residential units, rental prices have also fallen by 25%. A 3-BHK flat in Bandra’s West that never went up for rent below Rs. 90,000 per month is now available for Rs. 65,000 to Rs. 70,000. Similarly, the situation is not going to be much different for 3 BHK flats in south Mumbai, either.

How the COVID19 has impacted the market and what is the future investment, let’s take a look:

Increase in Demand for Residential Real Estate

Recent research by Savills India reports that the demand for residential real estate is expected to pick up in 6 to 12 months once the situation of the virus settles down a bit. Buyers are going to be more inclined towards smart homes and integrated townships. Another study also found that the real estate industry would need a year to find strong footing.

Taking into account as to what was seen in May, about 1/5th of the buyers are expected to return to the market. And although it may not seem like much, it still depicts light at the end of the tunnel. Despite the fact that a massive percentage (70%) of the population are not thinking of buying a home in a year, those who are interested in investing in the Mumbai real estate have decided to be patient and sit out this period. 94% of the investors are planning to decide after 12 months.

Low Prices for Residential Properties

Since residential property prices are decreasing in Mumbai and other cities, Knight Frank, a well-known property consultant, anticipates that this year, the prime residential real-estate prices would further plummet down by 5% and 3% in the next.

The last quarter of 2019 was bleak for both real estate developers and investors. The industry suffered a major setback due to the virus. But, as said earlier, the real estate sector has begun to show signs of life, albeit at a slow rate. This reduced price of property provided potential buyers and investors with a lucrative opportunity to buy residential property in the city. 

Assistance from the Government

The Indian government has come up with some measures to assist the property sector that paints a hopeful picture. These include allowing extensions in timelines to developers for project completion, or else they would have had to pay penalties. Also, the finance ministry has incorporated liquidity schemes for financial institutions as part of the government’s $266 billion (Dh977bn) economic package, which shall help developers secure credit.

Emergency Interest Rate Cuts

The Reserve Bank of India has announced two emergency interest rate cuts since the country went into lockdown. As a result, the borrowing costs decreased significantly for home buyers. Many are flocking towards flats for sale in South Mumbai. The buyers are viewing homes as an asset and physical security currently.

Home loans are at the lowest in many years due to the recent repo rate cut. This shall lure in more buyers to invest in residential properties and buy them, and as a result, increasing demand.

The prices of properties in Mumbai are dropping, but how far down they would go? Experts suggest that there is a limit to the property price drop. A natural assumption is that prices are going to drop, but one must remember that the real estate has gone through tumultuous times recently, and that has led to a price correction. Expecting further correction would leave developers unable to finish the construction.

Kanwal Hafeez
I am precisely described as a tech junkie working in Content Development and marketing. Literature lover by default. My interests range from politics to social issues,Real estate, Business books to tech trends, gadgets, marketing techniques and so on. I love sharing my vision and experiences through writing.

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