Resale Home Prices Must Dip to Sustain Buyers' Interest: Survey

With around 36 new residential projects launched over the last three quarters at almost 15-35
per cent cheaper rates than those for resale properties, the secondary home segment in Mumbai has come under immense stress pushing it into near stagnation, a recent survey said.

According to a survey by property consultant Jones Lang LaSalle, city developers, who fear competition from the resale property market are selling new properties at lower prices, which may force the latter to take corrective measures on pricing.

"There has been a robust demand for new launches as the prices are much lower than the resale properties. The registration data for secondary sales in Mumbai shows that prices of resale homes have, in fact, stayed aggressively high even though actual transaction volumes have failed to justify
them," JLL CEO - Residential Services Om Ahuja said.

The data shows transaction volumes have become increasingly stressed.

"It is a self-evident market truism that high prices cannot sustain in an environment wherein volumes do not support them. The prices on Mumbai's secondary sales market will have to come down so as to sustain buyer interest," he said.

Given the pricing war being waged by the primary sales market, the situation does not call for a mere softening of prices, but a full-scale correction in the resale property prices, Ahuja observed.

The report noted the registration data over the past three quarters revealed an increasing number of the city's home buyers and investors are moving towards new launches as their objective is to capitalise on the significant price advantage that these projects offer.

"With discounts hitherto unheard of in Mumbai's notoriously pricey residential market, the visible shift in the preferences of potential buyers from the resale to the primary market presents no mystery," he said.

In the first quarter of 2014, city's western and central suburbs witnessed the most new residential launches as well as robust absorption. In the same period, transaction volumes on the resale market of these precincts were very minimal.