“Vast plots of land give developers the flexibility to cultivate communities that address contemporary demands: expansive open spaces, community halls, and the like. It's evident that consumers are now inclined towards embracing extended spaces outside their personal apartments. Hence, gated communities, which offer both security and an enriched living experience, are becoming the preferred choice.”

- Vivek Rathi, Director - Research, Knight Frank

Unlock the secrets of Mumbai's real estate market with invaluable guidance from industry experts. Ensure you're making the best investment decisions by understanding this promising sector — a must-read for every potential investor and homebuyer

Mumbai continues to be a focal point for real estate investment and development, adapting to challenges such as land scarcity and changing regulations. Post-2021, policies like RERA have made the market more transparent and consumer-friendly, with projects like the Mumbai Metro enhancing connectivity and urban development. This environment sets the stage for a significant real estate expansion, inviting stakeholders to explore its potential. In this feature, we'll peel back the layers with inputs from both Nahar's seasoned veterans and external experts in the field.

Rising real estate: A look at the numbers

In 2024, Mumbai's real estate market experienced a significant upturn, marked by a record 10,901 property registrations in January, highlighting robust investor confidence and a tilt towards smaller, functional living spaces. This change aligns with broader economic growth and a favourable policy landscape, suggesting a lasting impact on market preferences.

February 2024 saw an impressive continuation of this trend, with 11,742 properties registered, generating ₹865 crores in revenue despite a year-on-year dip in stamp duty collections due to prior high figures. This period also underscored the strength of the residential market, making up 80% of registrations, and a shift in consumer preference towards homes in strategic locations like Central and Western suburbs known for their amenities and connectivity.

Significant reforms and infrastructural projects have been key drivers of growth. The introduction of RERA, GST, and FDI liberalisation has injected transparency and accountability into the sector. Recent enhancements in connectivity, particularly through the launch of Metro Line 2A and Line 7, have made commuting more efficient, benefiting areas like Chandivali.

A January 2024 Moneycontrol article quotes Niranjan Hiranandani, Founder & MD of the Hiranandani Group and also the National Vice President of NAREDCO as saying that real estate will grow faster than other sectors in India. He also predicts that if the growth of the Indian real estate market continues in 2024, India's GDP will touch 8 percent.

Knight Frank India's February 2024 report reveals a record-breaking month for Mumbai's real estate, with 11,742 properties registered, generating ₹865 crores in revenue for the state. Despite a 21% increase in property registrations in February 2024, Mumbai witnessed a 22% decrease in stamp duty revenue due to the previous year's high collections after a tax policy change. However, both registrations and revenue saw month-on-month growth of 7% and 14%, respectively.

The report highlighted the market's strength, with residential properties accounting for 80% of the registrations, indicating sustained confidence and a positive outlook. This period marked the highest February registrations in over a decade, attributed to rising incomes and a strong desire for homeownership, differing from the 2022 surge post-pandemic.

There's been a notable shift towards smaller apartments, with 45% of registrations for units of 500 sq-ft or less, despite a recent trend favouring larger spaces. The majority of these registrations were in the Central and Western suburbs, known for their amenities and connectivity, where buyers predominantly choose properties within their micro-market for its familiarity and suitable offerings.

Knight Frank India's Shishir Baijal highlighted the market's robust performance, underpinned by a significant yearly and monthly increase in registrations, signalling Mumbai's real estate appeal and resilience. He expects the upward trend to continue, bolstered by economic growth and possible easing of interest rates, fostering a favourable buying environment.

Governmental policies: Catalysts of change

Several policies and reforms have also been pivotal in driving growth in the Indian real estate sector. Notably:

• RERA (Real Estate (Regulation and Development) Act) of 2016 instils confidence by ensuring transparency and accountability.
• Amendments to the Benami Transactions Act aim to foster a climate of transparency.
• The implementation of GST in 2017 simplified the tax framework for property buyers.
• Granting Permanent Residency Status for Foreign Investors and allowing FDI in Real Estate has attracted foreign capital, and measures for affordable housing are changing the residential property landscape.

"These measures have introduced transparency and accountability to the industry," says Vivek Rathi, Director – Research, Knight Frank. Offering the example of the new mandatory RERA certification for brokers, he says, "This ensures that only those with the right expertise can sell in the primary market. It fosters confidence in both financial and operational dealings."

"There was a time when consumer apprehensions ran high in regard to real estate," Rathi recalls. "But today, those concerns have diminished. Having such regulations and certifications can only be beneficial for real estate."

Chandivali’s green advantage

In a bustling metropolis where concrete often overshadows nature, property valuation isn't merely an outcome of brick and mortar or the intricacies of urban infrastructure. It is also deeply entwined with the surroundings, and there's nothing more universally appealing than verdant spaces in an urban setting. This isn’t mere conjecture; there’s data to back it.

In Hong Kong, a place characterised by its towering skyscrapers, the influence of neighbourhood parks and green spaces on high-rise residential value was palpable. A study showed that the mere presence of such facilities could escalate property prices by a significant 16.88%. Indeed, globally, the trend of higher property valuations near green spaces has been gaining traction rapidly. In settings like the Noosa National Park, a marginal increase in green space led to land values rising by 7%. This green premium, observed in cities worldwide, is now making its mark in Mumbai, too.

Rathi observes, "Historically, the primary factors for buyers were always budget and commute. However, today's consumer landscape is witnessing a paradigm shift. The demand for homes in proximity to green spaces and essential infrastructure is on the rise." He goes on to explain the reason behind this trend, "Consumers have become acutely aware of their ecological footprint and are keen to make environmentally conscious choices. It's not just about sustainability; it's a realisation that these choices have a direct bearing on their health — a fact underscored by experiences during the pandemic." Rathi concludes, "While the premium on such properties might vary, there's no denying the growing consumer appetite for them."

For Nahar Group, the decision to provide residents with well-maintained, easily accessible green spaces is rooted in the firm’s commitment to amplifying the quality of life of residents. That this, in turn, makes its properties more desirable is a rewarding bonus. That said, for investors, verdant allure is not just an aesthetic or environmental asset but a significant economic one.

Rathi adds, "Townships today are increasingly being crafted around consumer preferences. While public infrastructure projects target broader population needs, the genesis of large residential projects is very much a reflection of current home buyer expectations. They're seeking more spacious apartments complemented by a diverse range of amenities."

He notes the rising trend in housing development, "Vast plots of land give developers the flexibility to cultivate communities that address contemporary demands: expansive open spaces, community halls, and the like. It's evident that consumers are now inclined towards embracing extended spaces outside their personal apartments. Hence, gated communities, which offer both security and an enriched living experience, are becoming the preferred choice." As the world rapidly urbanises, these pockets become sanctuaries of tranquillity, making them invaluable in the realty race.

Positive on Mumbai

“Real estate is cyclical by nature,” says Knight Frank’s Rathi, “but currently, there's a consistent theme of enthusiasm in the property market, not just in India but globally. Over the past three years, international housing markets have seen impressive growth in both volume and pricing. Though some western regions like Europe and America have faced demand challenges recently due to factors like home loan rates and cost of living issues, India remains an outlier. Thankfully, our inflation isn't skyrocketing as quickly as some international benchmarks.”

Performance, of course, varies across countries and even among Indian cities. However, the general optimism in the housing market remains. “Cities like Bangalore, Hyderabad, NCR, and Mumbai are riding this wave, driven in part by the momentum of consumption demand, population growth, and overall positive sentiment,” says Rathi.

“Currently, both the desire and the financial capacity of home buyers are in sync, making it an opportune time for investment,” he adds. When it comes to market momentum, we're witnessing unparalleled strength nationwide due to several factors. Rathi explains: “At the forefront is the inherent value Indians place on homeownership. This is further bolstered by ambitious infrastructural developments, with nearly ₹2,00,000 cr invested in transit-centric projects — a scale that's over 20 times anything we've seen in previous decades. Such developments fuel optimism, especially for those considering property investments in Mumbai.”

Invest wisely

The promising landscape isn't devoid of hurdles. From workforce shortages, rising construction costs, and complexities in land acquisition, to the demands of sustainability and compliance with regulations like RERA, the sector faces its share of challenges.

Reflecting on market dynamics, Rathi says, “In a rising market, optimism runs high. With an urban housing deficit nearing 3 crore units and an annual supply that doesn't exceed 10 lakh, there's a palpable 'fear of missing out', especially when property prices are surging. However, if someone opts to invest in an under-construction project, it's crucial to rigorously vet the developer's credibility.”

When asked about recommendations for potential investors, Rathi advises, “It's wisest to invest in ready-to-move properties or, at the very least, those that have secured an Occupancy Certificate (OC). This minimises any execution risks .”

The road ahead

For anyone considering a real estate investment in Mumbai, understanding market dynamics and potential growth areas is vital. Rathi offers some insights that might tilt the balance in favour of making informed decisions.

“Mumbai's property landscape is vast and diverse,” says Rathi. The city's sprawling metropolis presents myriad options, catering to various budgetary needs. Areas like the central and western suburbs have emerged as favourites among both end-users and investors, primarily due to their balanced offerings.

Expanding on this, Rathi notes that prime locales like South Mumbai are more about luxury living than investment. “In the past couple of decades, areas such as SoBo haven't necessarily been on the radar of investors seeking significant returns due to their high price points,” Rathi says. “The MMR region showcases a broad price spectrum, offering choices that range from the modest to the premium. You'll find options varying from ₹2,000/sq ft in regions like Vasai-Virar to a whopping ₹100,000/sq ft in the likes of Nariman Point. Given the limited progression in commuting infrastructure, places with substantial social and commercial importance naturally command a premium.”

Yet, where does the potential for the most significant appreciation lie? Rathi has a perspective. “Peripheral markets, especially areas like Navi Mumbai and some parts of the central and western suburbs, currently have a lower price benchmark. This gives them a heightened potential for appreciation in the coming years,” he says.

Mumbai's skyline is more than just buildings; it's a symbol of India's ambition. With reforms like RERA shaping a transparent market, and projects like the Mumbai Metro redefining city travel, the pulse of progress is clear. If you're thinking of buying a home or investing, the momentum suggests now's the time.