In an indication that economic slowdown is hitting hard the property market in India’s financial capital, property sales and purchase agreements fell sharply in Mumbai during January-May. However, leave and licence deals registered with the department of stamps and registration shot up during the period, official data showed.
Realty industry officials say people prefer a fixed monthly lease rent than buying new houses and paying equated monthly installment, which are volatile due to changing interest rates and cloudy market conditions.
During January-May, in the Mumbai island comprising Colaba, Sion and Mahim regions, sales and purchase agreements recorded a negative growth at 9.44%, while leave and licence agreements surged by 10.36%.
In western suburbs covering Borivli, Goregaon and Dahisar, the fall in the sales and purchase agreements was quite sharp at 16.45%, while the leave and license agreement rose 18.56%, said data compiled by the department of stamps and registration.
Paras Gundecha, president, Maharashtra Chamber of Housing Industry-Confederation of Real Estate Developers Association of India, told Business Standard: "Clearly, there has been a slowdown in the realty sector. Rates have gone up because no new approvals are coming. Property buyers are attracted to leave and licence agreements instead of new flat purchases.”
He added that the scenario could change provided various approvals were granted through single window system in 90 days. “If the clearance takes a long time, the builder and developer have to bear interest burden of 20-30%. However, this can be reduced if the time taken for approval is reduced and it will ultimately benefit the flat buyers as the price can be reduced." Sachin Ahir, Maharashtra minister of state for housing, said the property buyers had adopted a wait-and-watch policy, expecting reduction in prices. “It is a reality that people prefer to hire flat on leave and licence basis instead of new purchases,” he added.