Mumbai Real Estate is of the Rich, by the Rich, for the Rich

Just two numbers tell us the tale of Mumbai’s real estate asset over the last seven or eight years.

One, between 2006 and 2011, the development of apartments which price  up to Rs 25 lakh dropped from 21 % of the total Mumbai Metro Area (MMR) region to merely nine %. In the same period, development of apartments that price more than Rs 2 crore improved from 9 % to 22 %, as seen in the data below. Mumbai is now out of reach of the middle-class.

Two, thanks to increasing real estate asset costs, lakhpatis of 2005 are now crorepatis in real estate asset terms. A flat charging Rs 27 lakh in Jan 2005 is now appreciated at Rs 1.04 crore in the MMR region. That is an admiration of 285 percent!  No wonder rich NRIs and traders see Mumbai real estate asset as a safe home for their cash.

As difficulties are dealt with today, Mumbai’s real estate asset is among the most expensive in the world but there is still no lack of customers at the higher end of the industry. The industry is as much motivated by dollar-rupee forex prices than household loan prices. This is obvious from the fact that international investment in the real estate industry hopped from Rs 171 crore in 2006, when FDI started out up to the real estate industry, to Rs 14,027 crore truly, according to data available with DIPP (Department of Commercial Policy and Promotion). The number, however,  has now come down to Rs 5,600 crore this year due to the international economic concerns. Clearly, the performance of the rich even in real estate asset  are interconnected with the currency markets growth of the 2000s.

Hot international inflows have made real estate expensive to residents. The wide influx of investment encouraged up land costs and the spinning costs usually encouraged actual customers away from the industry. Instead, traders with excess cash were roped in. Since an investor-driven industry is less clear and has a lot of complications, it started to entice a lot of black cash.

The result? Sky-rocketing real estate asset costs. Price and price of apartments in MMR improved at a improved yearly rate of growth of 22 % since the infusion of international capital!

“The increasing gap between the costs and cost is directing towards risky industry methods,” says Pankaj Kapoor MD at real estate asset talking to company Liases Foras.