Real Estate In Mumbai

Real Estate prices all over the country have corrected by more than 25% in the last 12 months due to projects getting delayed as a recourse of liquidity crunch. But the only city that seems to be still resilient to this chain reaction is Mumbai. Property prices in parts of Mumbai have corrected by about 10% but are still the highest in the country. Prime areas in Mumbai are still going at around Rs35000-Rs45000 per sq feet and this is after the correction.

Suburban Mumbai and projects in areas such as Thane are much cheaper at around Rs8500-Rs10500 per sq feet. Developers are expecting a further correction of 10-15% over the year on grounds of many projects getting delayed and further expectations of a fall in prices. Real estate as an avenue for investment remains the most lucrative even today in Mumbai but only with a long term horizon. One can expect around 27% returns on an average for a period greater than 7 years.

Real Estate Outlook 2009

2008 was the worst year for Real Estate and the BRIC nations did not have the worst of it. In fact, US and Western Europe were the worst hit. Most builders saw their share value drop by over 76% since the housing bubble burst. As per a research by Reis, mall vacancies hit a 10 year high and are expected to worsen in 2009.

So what’s in store for real estate markets in 2009, particularly in India. The story of juggernaut growth for BRIC nations has failed to prove itself. Till early 2007, the world used to believe in the “decoupling theory” of the BRIC nations, a phenomenon that states emerging markets can maintain growth independent of any major disruptions in the US economy.

What real estate experts unanimously agree on now is to look for countries with strong middle-class growth and stick to housing and retail with a unshaken focus on long term. In India for instance DLF, Unitech and HDIL learned the price one has to pay for being overly aggressive. Their stock prices were slaughtered in 2008. Real estate in India is a scenario of oversupply in the retail space and companies are diversifying exposure to core infrastructure now.

Sam Zell, chairman of Equity Group Investments and Equity International does not consider India as an avenue for investment in the near future. His funds are more tuned to Brazil and China. Why? He says that bureaucracy and lack of transparency is the key problem with real estate development in India and projects don’t work out the way they look on paper. It’s too much of a hassle for an investment which would give him more returns in China and Brazil. He sees immense potential in China and Brazil because they would always be shielded to economic turmoil to a large extent since Mortgages contributed to 4% or less of their GDP as compared to 65% in US and 74% in UK.