According to key findings in recently published a report on Mumbai's real estate market is the fall in the city’s affordability.
This development was published by Knight Frank, a major real estate advisory business, in a report on Mumbai's real estate market.
The report is based on research completed in the second half of 2022 and includes major market trends and developments.
The Knight Frank Affordability Index, which analyses the proportion of a household's income required to cover the monthly instalment (EMI) of a dwelling unit in a certain city, reveals that affordability has decreased from 93% in 2010 to 53% in 2022. This suggests that it is becoming increasingly difficult for Mumbai residents to afford a housing unit. The drop in affordability is cause for concern since it could lead to a decrease in demand for housing units and a slowdown in the real estate market.
Sales and Prices:
The research also reveals an increase in housing unit sales in the second half of 2022, with 85,169 units sold, indicating a 35% year-over-year gain. This implies that, despite the reduction in affordability, there is still a considerable demand for housing in Mumbai. Furthermore, the research states that the average price of a house increased by 3% in the second half of 2022, with the average price standing at 7367 Rs per sqft. This, together with the fall in affordability, may make it more difficult for potential purchasers to enter the market.
Rental values have also risen in the second half of 2022, with an average rental value of 110 Rs per sqft per month. A 3% change over a year and a 0% change over six months were seen. According to the report, the unsold inventory remained at 159832 units in 2022, representing a 4% YoY rise. This means that, despite the increase in sales, there is still a significant amount of unsold inventory in the market, which could put downward pressure on prices.
It's worth mentioning that residential prices have been steadily rising since the first half of 2021, after falling steadily from the second half of 2016 to the first half of 2021.
Market Trends:
The report also provides insights into market trends in different micro-markets within Mumbai. It notes that some micro-markets, such as Worli and Ghodbunder Road, have shown the highest 6-month increase at 11% and 8% respectively, while other areas such as Vashi, Tardeo, and Bandra (W) have shown a decrease of 5%, 1%, and 5% respectively. This suggests that the market is not performing uniformly across all regions of Mumbai.
The report also breaks down the unsold inventory in different regions of Mumbai, with the highest levels being seen in the central and western suburbs at 33,789 and 33,926 units respectively. The lowest levels of unsold inventory were seen in South Mumbai at 5,381 units, however, it was a 130% YoY increase. This highlights that certain regions of the city are facing a higher degree of oversupply than others.
"Approximately half the supply added in the Mumbai market in Q4 2022 was of 1 BHK and 1.5 BHK product type amounting to 45%, followed by 2 BHK and 2.5 BHK amounting to 38% of the total supply added. Products of up to 500 sq ft size followed by 500-1000 sq ft contributed the most to supply accounting for 55% and 33% respectively in Q4 2022." The report said.
"The Western Suburbs are one of the most diverse markets catering to all income groups." Report further went on to say.
According to the report, "Despite several headwinds, strong consumer demand continues to drive the market. However, any further rise in mortgage rates and property prices will have an impact on consumer sentiment."
“The increased raw material prices coupled with strong demand were the primary drivers for developers to opt for price rise. Nonetheless, developers remain mindful to not deter the strong consumer sentiment,” Knight Frank noted in the report."
The research also illustrates the diversity of market patterns in different micro-markets within Mumbai, as well as unsold inventories in various Mumbai regions. This information is valuable for anyone trying to understand market conditions and make informed decisions about buying, selling, or investing in Mumbai property.
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