Amidst COVID-19 outbreak, Mumbai’s residential market remains flat; Navi Mumbai and Thane witness rise in demand, reveals Magicbricks Propindex Report Q1 2020

At the outset of the COVID-19, Mumbai’s residential market remains stagnant due to strained funding environment and a stressed luxury housing segment but the adjacent residential markets of Navi Mumbai and Thane witnessed rise in demand due to affordability and connectivity with,revealed the latest edition of Magicbricks’ PropIndex (Q1, 2020).

While the global outbreak of COVID-19 and the ensuing lockdown did impact India’s real estate, Mumbai residential market remains almost flat. With a quarter of the supply in the price segment of ‘above Rs.20,000/sqft’, Mumbai is still one of the most expensive cities in India. Despite the Mumbai Real Estate market being stagnant and overpriced, the demand is alive in main Mumbai due to aspirational buying, and in peripheral areas due to comparatively affordable properties.

With prices around 5-15% less than Ready-to-Move segment, under construction segment posted 6.6% growth in the last 5 years and 2% YoY. With the luxury homes’ inventory piling up, builders are shifting towards affordable and low-cost housing. Houses with prices less than Rs.10,000/sqft have been favoured by buyers, witnessing the least change in prices. Premium segment houses remained out of favour by most buyers, resulting in just 6% of the demand for 4 BHks and above.

Contrary to Mumbai, Thane’s residential market had a 4.8% rise in Q1, 2020 primarily due to availability of affordable housing and connectivity with business districts. The area also witnessed price rise in the last two quarters and in Q1, 2020 there was a rise of 2%.

In Navi Mumbai, the residential market clocked a decent 19% growth in the last five years, while growing around 5% YoY. Under construction segment prices remained stagnant for the year, while falling by 1% QoQ. No clear trend was visible in Q1 2020andpricechangeinmostlocalitieswascyclicalinnature.

Commenting on the PropIndex, Sudhir Pai, CEO, Magicbricks, said, “The Government is taking stringent measures to contain the Covid-19 outbreak, but the long-term impact on property market is uncertain, and yet to be assessed. But it seems that the consumer interest has not tapered off. There is a pent-up demand for ready-to-move in properties as our data suggests that the 80% of searches are happening in this segment and the rest for under-construction.”

The PropIndex also suggests that in Mumbai, more than 40% of the searches for houses priced less than Rs.10,000 per sqft, majority of which are available in suburbs such as Borivali, Dahisar, Goregaon, and Malad, along with peripheral areas in the Mumbai Metropolitan Region (MMR) such as Mira- Bhayandar and Vasai- Vrar. Smaller configuration homes are the choice of home buyers, with 1 and 2 BHK homes making up around 80% of the property searches in Mumbai. 1 BHK is also the most undersupplied segment with only 28% of the total supply pie.

According to Magicbricks’ PropIndex, the residential sectorof Mumbai was primarily being driven by threecritical factors:

• Corporates shifting away from South Mumbai and upcoming metro connectivity, expected to trigger a strong demand for houses in suburbs
• Proposed property tax for land under construction (LUC) as per actual construction status, would aid in reducing prices
• Expanding metro network would gradually normalize property rates across the city

However, it will be interesting to see how these factors play out as the market recovers from the outbreak of COVID-19 and the ensuing national lockdown.

As things return to normalcy, Magicbricks Research foresees the next two years to be crucial for the residential segment, as most of the stuck projects are likely to get completed with the help of the Rs.250 billion bailout fund. At the same time, completion of major metro lines should ease connectivity between peripheral and commercial areas, opening the next phase of growth. At last, it’s imperative for the sector to withstand these testing times and come out more robust and well prepared, once the COVID-19 situation gets better.