About 58 per cent of luxury apartments — more than 1,500 square feet each —are unsold in Mumbai, rating agency Icra has said.
It also said the unsold inventory in Mumbai stands high at 54 per cent of the total units, while that for central Mumbai, which houses many luxury projects, stands at around 52 per cent of the units.
“The unsold inventory in Mumbai might be higher due to long execution delays in some of the projects. Around 11 per cent of the area in Mumbai city does not have revised date, indicating long delays, as compared to 9 per cent in central Mumbai,” it said.
Also, the average date of completion for Mumbai is around 1,020 days, while that for central Mumbai is around 920 days. Total value of unsold inventory in central Mumbai is estimated to be Rs 45,000 crore, while that for Mumbai city stands at Rs 83,000 crore. Unsold inventory in projects being developed by the tier-I developers is estimated to be Rs 33,000 crore, it said.
“Considering the high value of inventory in the micro market, the underperformance of the geography has severely impacted the real estate sector in Mumbai,” Icra said.
The Central Mumbai micro market has also been grappling with delays in the projects under construction. Approximately 18 per cent of the units are proposed to be delivered in FY2020 and FY2021. A significantly high 71 per cent of the units have proposed deliveries in or after FY2022. This is possibly an indication of the contingency buffer being built in by the developers for unforeseen delays in execution, it said.
Icra expects the weakness in the luxury residential real estate in Mumbai to continue in the near term.
“The developers will continue to face liquidity pressure due to challenging financing environment and weak demand. Few developers with strong balance sheet, track record and group backing are expected to consolidate their position and market share during the testing times,” it said. Various measures, like reconfiguration of apartments to reduce ticket size, association with stronger developers, might help the stressed developers to liquidate the inventory gradually.
However, maintaining supply discipline remains critical to strengthen the bargaining power of developers, it said.