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All style no substance

Surging prices, rising inventory and falling sales do not bode well for the real estate market.

Tushar Mane

If you were a first-time home buyer in a metro, what adjective would best describe your emotional state: excited, frustrated, exasperated or even certifiable? I can understand if you ticked the last box. Having covered real estate for a good part of my journalistic career, the boom-bust-boom cycle is now increasingly looking apocryphal. Prices have bent the affordability curve beyond recognition.

Since the crisis of 2008, when real estate companies were on the verge of going bankrupt but for the largesse of Indian banks, prices in the residential market have gone up across major metros. In Gurgaon, the most active property market in north India, the weighted average price of residential units sold has shot by 126% over the past five years; the figure for Mumbai: close to 100%. But the number of housing units sold — also called the annual absorption rate — is dismal for these two markets compared with Chennai and Bengaluru, where price appreciation has been more calibrated over the past five years, growing by 43% and 50%, respectively. In other words, steady price increase has not been accompanied by steady growth in demand.

Today, as things stand, the Indian paradox is increasingly getting reflected in the real estate market as well. While a ₹1-crore apartment would be defined as mid-market in Mumbai, in Bengaluru or Chennai, it would qualify as luxury. According to property consultant Knight Frank, Mumbai remains the most unaffordable market with 29% of the city’s total under-construction units crossing the ₹1-crore price point compared with 11% in the National Capital Region (NCR, comprising Delhi, Gurgaon, Faridabad and Noida) and 5% in Bengaluru.

Juxtapose home prices with the per capita income in Mumbai (₹1.41 lakh, according to the recent Economic Survey of Maharashtra) and it appears that the average cost of a flat in the city is about 70 times the average Mumbaikar’s annual income. Even if you were to look past the economically weaker section and low income households, and consider households with annual incomes of ₹10 lakh, a house still costs 10-15 times. Incidentally, a 2012 task force report by a central government-appointed panel defines “affordable” housing as where the cost of the house doesn&


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