JLL India: 69% of unsold houses in Mumbai priced above INR1 crore

MUMBAI (Sept 23): A good 69% of unsold property inventory (within the Brihanmumbai Municipal Corp limits) is of units worth more than INR one crore (about RM658,000) each, amounting to 30,501 units out of a total 44,032 reported JLL India.

With land prices here only expected to go upwards, there will only be mostly launches that will be priced above INR one crore and above, said JLL India.

“Let us consider this-from the number of new launches in 2Q15, the share of housing units that are worth over INR one crore each (within BMC limits), stands at 83%,” said JLL India COO and international director Ramesh Nair.

“Although there was a reduction in share from 90% at the end of 1Q2015 due to some new launches in suburban locations, it is still overwhelmingly high for a city where only a limited percentage of residents are able to afford ticket sizes of over INR one crore. We can expect this percentage share to go up, albeit marginally, in launches in the near term,” added Ramesh.

Moreover, in 2Q2015 launches, JLL reported only 3.21% of housing are in the INR31-65 lakh (RM20,355-RM42,682) ticket size and there were no units launched under INR30 lakh ticket size in Mumbai (BMC limits).

“Compared to pan-India figures, the numbers are highly skewed towards the higher ticket sizes in Mumbai. There are very few units in the affordable range that were available from all these launches and most of them were in the suburban locations. Even if the overall inventory is considered, there is very little stock in the affordable range (INR65 lakh and below) in the city,” Ramesh pointed out.

Meanwhile, taking a look at housing affordability, the normal multiplier should be six times the annual household income: in other words, it should take six years’ salary to own a house, said JLL India.

Similarly, if we were to calculate the weighted average of ticket sizes in Mumbai city, we get a number slightly above INR2 crore, added JLL India.

This shows that if the annual income per household is INR7.5 lakh, it will take 27 years for a person to afford an apartment worth slightly over INR2 crore in Mumbai. For a house worth INR1 crore, it will take up to 13 years, which is above the normal multiplier of six times.

“In order to cater to the budget of a majority of home buyers in Mumbai, developers have been taking steps to steadily reducing average unit sizes over the last few years and will continue to launch smaller-sized apartments for the same reason,” said Ramesh.

“Mumbai takes top placing to reduce average unit sizes at 26.4% from 2010-1Q2015. The average unit sizes in Mumbai have been the lowest among Indian cities,” concluded Ramesh.