It’s been an unusual 6-8-month period as a tracker of Mumbai real estate. Normally, the entire ecosystem is hard-selling a narrative that ‘All is Well.’
However, in recent months I have found myself dealing with the exact opposite scenario from the ecosystem. Housing sales have been strong with record registrations but the ecosystem has been signaling that the number is inflated. Sale registrations have hit a record 1.22 lakh in 2022 – almost 70 percent higher than the levels seen during 2016 - 2019.
“Who is really driving these sales numbers in 2022 because no one in my circuit is feeling this bonanza?” enquired one mid-level developer.
At one level it can be answered with a routine response - that registrations are dominated by sales in the resale market. Historically, that market has contributed two-thirds of all sales. Hence, while several builders with under-construction inventory may not be finding many buyers, the action is led by the resale market.
It’s a sound argument but it gets tested when another stakeholder points out the gap: Banks and NBFCs. These lenders play a critical role even in the resale market. “Which lender is serving these home buyers in the last 6-9 months because they aren’t coming to me?” one heavyweight lender asked me.
he answer really is: No one. That’s because these ‘sale registrations’ are not sales. These are free homes given to existing owners in buildings. Why free homes? Because Mumbai is undergoing a wave of redevelopment of old buildings. With increasing FSI at a cheaper cost – old buildings of 4 or 5 floors are set to become new buildings of 12 – 18 floors.
The owners of apartments in these small buildings are promised newer and bigger apartments in the new building. The agreement between developers and owners in this regard is called a ‘Permanent Alternate Accommodation Agreement’ or PAAA. Ideally, these agreements should not be labelled within the ‘sale’ category but the mandarins in government have not yet made that demarcation. Read More On..
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