Development in Mumbai has always been one-directional from the south towards the northern suburbs
Residential property prices across the country are under pressure because of a sharp slowdown in demand for new homes. Prices in many parts of the country have seen correction as inventories have gone up, but Mumbai continues to remain one of the most expensive markets in India.
Real estate prices in India's commercial capital is never out of news, says Anuj Puri, chairman & country head of JLL India.
"From the sale of spectacularly expensive trophy properties in South Mumbai to the ever-widening affordability gap for middle class home seekers, the city's residential real estate market is under a constant jaundiced limelight," he added.
JLL listed seven reasons behind Mumbai's high property prices:
1) Geography: Mumbai is surrounded by water on three sides, preventing circular development in the city. Development in Mumbai has always been linear (or one-directional) from the south towards the northern suburbs.
2) Government policies: Over 2013-2015, the Maharashtra government has been increasing ready reckoner rates by 15-20 per cent across Mumbai, a significant jump for the city where prices are already high.
3) Limited supply of land: A significant chunk of land in Mumbai is currently locked in slums and dilapidated buildings, restricting supply of new areas for development.
4) Infrastructure: Major projects such as the Mumbai trans-harbour link, coastal road network, the Navi Mumbai international airport, etc. have made very slow progress, forcing end-users to live in established localities.
5) Investor demand: Non-Resident Indians and people of Indian origin comprise a significant chunk of residential real estate buyers in Mumbai, driving up prices. Often, half the inventory in new projects is sold to such investors even before local brokers get wind of the launch.
6) Migration: Per-capita income in Mumbai is nearly double of the national average, attracting a lot of migrants from other parts of the country. The constant need-based migration to Mumbai encourages landlords to hold onto high prices.
7) Increasing nuclear families: Mumbai's current inhabitants require additional homes because nuclear families are on the rise. The preferred route is to sell an apartment in a prime area and purchase two apartments in a relatively sub-prime area. So, inherent demand from Mumbai's local inhabitants is always rising, which reflects on property prices.
"The fundamentals that drive demand for homes in the city are the reason for Mumbai developers' apparent ability to defy gravity and keep residential prices so high. The fact is that sales are happening for all the above reasons - and they will continue to happen," the property consultant said.