Valuations on property should be based on logic, and it looks like correction time for South Mumbai properties
A swinging stock market created the feeling that the impact would be immediately felt on the property market. One cannot rule out the connection of money that flow in through gains made stocks but genuine buyers or investors of real estate have been major contributors to the bull run here. The buying has happened across the board by actual users, investors, coporate, local funds, international funds/developers fuelling demand for land or ready goods. We have a similar situation with the stock market getting fuelled with local and foreign funds(FIIs) and having run from a 4000 odd BSE Index to 18000 and upwards levels.Similarly,the property market has had a non-stop run and is about to take breather. It looks like a correction stage for overpriced properties in South Mumbai is round the corner. Properties in an around Worli/Prabhadevi/Bandra and in some locations in North and East parts of Mumbai may not witness the same. However, prices will stabilize and flatten out between Juhu and Borivali.
A short true story on a South Mumbai transaction: I was approached by a seller form Altamount road for a sale of 3 bedroom apartment about four months ago. He asked me for my “valuation” on the property, to which I said approximately Rs. 40,000 a square foot. He seemed irritated and said he had an offer of Rs. 60,000 and I was way off the “market rate”. I responded saying that the maximum he would get is Rs. 45,000. I recently got to know that he sold the property at Rs. 40,000 a sq.ft. Now ,I am not trying to prove a point here, I have also gone wrong in case where people have managed to get what they want but all that happen in rising market. Today the situation is different.
A complete stalemate situation exists in South Mumbai where every seller starts the prices at Rs.60,000, which is the best price set as the ‘Benchmark” for only the top end properties as seen in this publication’s first page. People latch on the ‘Top End’ price for midrange properties. Now that makes no sense. Who decides the price? The seller cannot. The seller can demand a price, not dictate. The buyer or the average prices of the sales of “similar type” of properties determine rates.
Sonali Mehta , who has been house hunting shared her frustration with me. She says; “We’re a young couple looking out for a two bedroom apartment having a substantial budget, with a location preference of Napean Sea Road and its vicinity, but in vain. “Despite contacting all the leading brokers, there does not seem much interesting inventory available, and what barely does managed to fit the bill has its price hiked up by almost 20% in one month for no valid reason.
“To make matters worse, there are some freak transactions by buyers who have their own reasons and resources to buy properties at prohibitive prices, which some brokers adjudge as new prevailing market price for buyers like us to follow suit. I fervently hope some realistic prices prevail,” she says.
Like the Mehta family I know of almost a dozen or more families who are stuck in such situations in spite of having the budget. I strongly feel people should look at the correcting their prices but really wonder who is going to make the beginning. I think the brokers must guide their sellers/clients correctly on what should be the valuations based upon logic, plus a reasonable premium for prime properties.