Notional value added to realty prices
By Dr. Sanjay Chaturvedi
How come 2010 bypass 2007 level of pricing, that too in remote and extended suburb like Thane and Panvel? Do we have a second boom after 2007. World over the crises for funds and big name trembling each after another, latest being Goldman Sach investigation episode, giving nightmare to investors. But Mumbai is out of this world. It is out of the ambit of economic recession which the country is facing.
Do we really have Rs.10,000/- per sq.ft. in Thane selling or it is just another paid media campaign? Do we have a reality in real estate or it is just notional value added by builders and sellers to capitalize on fear psychic of buyer who panics when he hear that rates have gone up. The sale strategy says that with current price nothing is selling so enhance the rate which will enhance the pulses of buyers and compel him to purchase.
RTI inquiry reveals that average flats sold in Mumbai is just 25% in volume as compared with boom time 2007. The sale have declined drastically in mid price segment where as budget homes are selling in great volume on the outskirts of Urban centers and extended suburbs.
In Dadar, new project is selling for Rs. 8000/- per sq.ft. and in Nahur and Mulund, there are no takers of three bedroom hall kitchen flats. In Powai and Chandivali, builders have canceled buildings announced in 2008-09, in recession time, and now since notional rally started, the building were relaunched with Rs.3000/- additional margin. In Mulund and Thane, because of forest issue, people are panically selling off there investments, hence sale volumes are high. Lot of second sale is in offing and investors are changing hands.
March and April are usual months for sale to top the volumes in a year because of inclusive migrations and external relocations of families due to academic year closure. This trend is happening since last three decades. The sale prices are capitalized upon this trend and hence it is tried to prove that the a boom is setting its trend.
Second biggest reason is huge funds are chenalised through realty companies who are purchasing redevelopment societies and asking them to vacate for a handsome price. These occupants are now looking to accommodate themselves in suburbs, purchasing at higher level of pricing at the same time saving good amount for future earnings.
Congestion is the third ad man aspect where relocation of homes are taking place. Mumbai city is migrating into reforms of its own where suffocating location public transport is compelling them for going into less dense areas like Panvel and Boisar.
The land price for Panvel have reached to Rs.12 crore a acre (Rs.3 lakh a guntha) . If a developer wants to develop it, per sq.ft. rates for NA land will be Rs.3000/- approx. Adding cost of construction, cost of funds and overhead cost, the rates will be Rs.6000/- per sq.ft. The rate is almost same as in Mulund or in Dahisar. Why a person will purchase such costly land for housing?
It is just a notional value added by sellers and builders whereas the economic condition do not favor such enhancement. The market will correct itself again and market force will prevail.
