Weakened demand for high value residential units have resulted in an inventory pile-up of nearly Rs 45,000 crore in central Mumbai alone, as on June 30 this year, the report said.
The weakness in the luxury residential real estate in Mumbai will continue in FY20 on the back of liquidity pressure faced by developers and weak consumer demand, it said.
As per the Icra report, the unsold inventory in most of the markets in Mumbai is high at present and it stands around 52-54 per cent of launched areas across all the micro markets.
Central Mumbai contributes to 32 per cent of total unsold inventory in Mumbai city, however, in terms of the value of inventory, the share is much higher at around 55 per cent and more than 70 per cent of it is from tier-I developers.
"We estimate that the value of unsold inventory in central Mumbai is at Rs 45,000 crore as on June this year. Considering the high value of inventory in the micro-market, its underperformance has severely impacted the real estate sector in Mumbai," the report said.
Commenting on the trend, Icra Assistant Vice President Anand Kulkarni said, "Mumbai is one of the largest markets for the luxury residential real estate in the country. In line with strong growth commercial activity in central Mumbai areas like Worli, Lower Parel and Prabhadevi, demand for luxury residential segment had started to pick up in the past."
He further said, many developers, including the organised ones, beefed up the supply in the micro-market expecting a further boost in demand.
"However, due to weakened demand for over the last two to three years, central Mumbai has witnessed significant high value inventory build-up," Kulkarni said.
According to the report, the luxury residential segment has been the most impacted segment due to various regulatory developments as well as market dynamics.
"Incessant delays in delivery as well as high GST incidence, resulted in a change in trend in the industry from pre-booking of under construction homes to preference for ready-possession homes. Also, the high cost of land and construction, weak demand, back-ended customer advances, and limited avenues of external funding together have pushed the luxury residential segment into distress," it said.