With due respect to recent positive reports on Real Estate sector, to access the situation on ground, I analysed the property market of south mumbai, an area which is tipped off as the most lucrative area for real estate companies by most of the analysts. There, I found that although the picture outside looks great on present basis but behind the scenes the situation is extremely critical on future basis.
In South Mumbai, the deals are not happeneing while the rates are increasing every passing quarter. Some of the brokers whose entire livelihood is on deals, are finding it difficult to survive and are frustrated at the cartel of builders and investors who are not allowing the rate to go down. New projects, when launched, are getting sold off in bulk by builders to black-money-investors at significant discount and then the other units which are put up in the market for sale are quoted the price atleast 50 % above the rate sold to investors. Like this way, every new project in south mumbai is getting 40-60 % booked at the time of launch and other 40-60 % is remaining unsold for a long time. The bubble in real estate market of south mumbai is evident from the fact that even in old depleted buildings (chawls) of thakurdwar, khetwadi, etc., psf rate on carpet area is now quoting at minimum Rs. 25,000-35,000 which was the rate quoted by posh walkeshwar area 1 year back. In south mumbai backward areas like thakurdwar, khetwadi, etc. one is not able to buy even a 200-225 sq. ft. chawl room below Rs. 50 lacs which reflects the gross overhype and bubble of south mumbai real estate. If you take an example of recent project launched by Orbit in Girgaum Area (Prarthana Samaj- Near Sir H.N. Hospital), if one makes an enquiry, he is told that the project is 60 % booked and the flats are available from only 29th floor onwards. Only 3BHK are available with an area of approx 1715 sq ft and approx 2255 sq ft. and the construction is expected to begin in November 2010. The rate on first enquiry is quoted at Rs. 35,000 psf on super buil-up basis (carpet area of flat is 45 % less than super-built-up area). If you go with the final intention of booking and negotiate hard then the rate straightaway gets reduced to Rs. 25,000 psf on super built-up basis. This itself reflects the shallowness of booking as otherwise no firm reduces rate by 25-30 % if one negotiates and actually buys. Still, at Rs. 25,000 psf on super-built-up-basis the price for the minimum area flat available comes to approx. Rs. 4-4.5 cr. Hence, Orbit is pitching this project as luxurious project. Now, if you visit the actual site, the building coming up is opposite prarthana samaj vegetable market which is crowded all the time and is full of unhygine and mosquitoes. To add, opp. the site of the building there is a BMC garbage accumulation point where all the garbage from vegetable market as also from nearby residents gets accumulated. Also, if you just walk just for 3 minutes from the site towards Alankar Cinema then starts the Khetwadi Area which is full of chawl-type buildings and each lane is a distinct mark of unhygine. To go further, if you walk 15 minutes away from the site beyond Alankar Cinema, there comes Bhendi Bazaar Area which is extremly dirty and full of bad smells. Thus, if at such a location of south mumbai one needs to buy a luxurious flat which has not even commenced construction, by paying Rs. 25,000 psf on super-built-up basis which works out to approx. Rs. 45,000 psf on carpet basis, this situation is similar to Ketan Parekh and Harshad Mehta phase of stock market wherein for even HFCL, you were required to pay Rs. 3000 per share. This is just a one-off example of bubble-like situation of mumbai and specifically south mumbai and there are many such other projects even worst than this one which are quoting unreasonable prices at pre- construction and construction- stage and are having unsold units for quite a long time. It is said that when last leg of the market also command premium valuations, it is the end of the bull phase and start of a significant correction. Similar is the case with south mumbai property market where even old depleted buildings, so-called chawls, have now started quoting a premium for their property in hope of redevelopment at a later stage by refusing to sell below Rs. 25,000-35,000 psf on carpet basis. Whether it will be a government-induced curb on prices or a low-actual- deals-high-supply-driven curb, a significant correction awaits for the real estate market of mumbai as such bubble can't persist for too long. Rgds. Mahesh -- You received this message because you are subscribed to the Google Groups ""GLOBAL SPECULATORS"" group. To post to this group, send email to [email protected]. To unsubscribe from this group, send email to [email protected]. For more options, visit this group at http://groups.google.com/group/globalspeculators?hl=en.
