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Residential property prices in Mumbai could fall 10-15 per cent, say experts

Property Report
Mumbai slums stand in stark contrast to the city's prime residential areas where prices reach US$2,000 per square foot

Mumbai slums stand in stark contrast to the city's prime residential areas where prices reach US$2,000 per square foot


Residential property prices in Mumbai’s prime locations could fall 10 to 15 per cent by the end of the year, according to real estate consultants Jones Lang LaSalle. The residential property market in India’s financial capital have surged 40 per cent in less than two years, surpassing 2008 levels. Prime locations are selling for up to US$2,000 per square foot, yet the market is showing signs of slowdown.



“Rapid rise in property rates in Mumbai have acted as a dampener for residential demand in the city, primarily in the premium and mid to high income segment,” Jones Lang La Salle said in its latest report. Industry experts said that home registrations in Mumbai are down 30 to 35 per cent compared to the previous year.

Lack of affordable housing and rising lending rates are unlikely to aide falling transaction volumes and the market is unlikely to recover in the coming months, said Shobit Agarwal, managing director of Capital Markets at Jones Lang LaSalle.

Recent years’ price surge have prompted India’s central bank to raise interest rates nine times since March 2010 making it one of the most aggressive banks in Asia in tightening monetary policies. Analysts expect further rate increases to come despite a slowdown in the economy. GDP grew 7.8 per cent in the first quarter of 2011, the slowest pace in over a year, and lower than the 8.2 per cent forecast in a recent Reuters poll.

As a result of the rate increases, mortgages that once took homebuyers fifteen years to pay back are now taking over twenty years to service. Jones Lang LaSalle’s Agarwal says the wide disconnect between the expectations of buyers and sellers are also contributing to a drop in activity in the market. In addition, the rising costs of four key construction components, steel, cement, labour and bricks, is also taking its toll on the real estate sector.


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