Mumbai records back-to-back home price declines in 2018

[MUMBAI] Home prices in India's financial capital Mumbai dropped for a second consecutive year in 2018 with buyers, shopping for discounts, content to remain on the sidelines expecting future declines, according to Knight Frank.

A 6.8 per cent fall in Mumbai's residential property prices last year was the worst among eight Indian cities, according to the property consultant. It came after a 5 per cent decline in 2017, when values weakened for the first time in a decade. A cash crunch among non-bank lenders in the final months of last year delayed loans and hurt buyer sentiment, according to the report, with sales showing a "significant slowdown since then."

Mumbai's struggles echo those of cities from London to Hong Kong, Singapore and Sydney, where investors have been jolted by price drops spurred by government policies and volatile markets. India has seen unprecedented change rattle its property market over the past two years. New rules have forced transparency and accountability among the nation's notoriously unreliable developers while a surprise cash ban and new sales tax damped sentiment. All this means buyers now have more bargaining power.

"If the developer is not willing to reduce prices, most buyers are ready to wait and are in no hurry to close the transaction," according to the Knight Frank report. "They are expecting the prices to come down in the future, which was not the case until a few years back."

It wasn't all gloom for Mumbai's developers as home sales climbed 3 per cent last year and launches of projects more than tripled. The city and its outskirts, including Thane and Navi Mumbai, together house about 20 million people.

Sales across India's top eight cities increased 6 per cent from a year ago, while project launches jumped 76 percent.

Here are a few more highlights from the report:

Apart from Mumbai, home prices corrected in Pune and Chennai by 3 per cent and Kolkata by 4 per cent.

Prices rose 7 per cent in Hyderabad due to the high availability of ready apartments, and by 2 per cent in Bengaluru and the National Capital Region, which includes capital Delhi and Noida.

Most developers are concentrating on the affordable and mid-range segment with 60 per cent of launches selling at prices below the 5 million rupees (S$97,550) mark.

Bengaluru saw the highest annual increase in sales at 27 per cent.

The liquidity crunch among non-bank financial companies in the second half hurt cash-strapped developers with few financing options left.

"The liquidity crisis, if not resolved, is likely to keep the noose tight in the Indian real estate sector in 2019, hampering its growth," Anuj Puri, chairman of Mumbai-based Anarock Property Consultants said separately. "New launches are likely to remain muted."

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