An In-depth Analysis of the Cost of Real Estate in Mumbai

1. Introduction to Mumbai Real Estate Market

Given its status as the financial capital of India, Mumbai is one of the most important real estate markets in the country. The city has its own unique characteristics as it has evolved through centuries.

This development has dictated the unique identity of this city and has resulted in disparities between different neighborhoods. In all of its glitzy offerings, it is often easy to forget the hardships that people have gone through in order to establish this wild west of business.

The city has seen significant infrastructure developments and, with urbanization and migration stemming from rural distress, the demand for land and property has touched the sky. Over the years, Mumbai has been the breeding ground for India’s real estate trends, and its current market position is a reflection of this.

Owing to a strong service sector, Mumbai is home to many prime commercial spaces generating close to 7 billion in rents alone. The city is home to stock exchanges, banks, corporate headquarters, luxury cars, and a pedigree of schools.

It also houses the biggest Hindi film industry along with significant other commercial activities. Catering to the ever-emerging demand for housing, there has been a large amount of residential development.

The city is the “Mecca of real estate” and attracts a wide investor base whose purposes range from speculation to investment to hedging against inflation. The demand and supply of luxury units see adjustments from time to time, regulated by constraints and challenges of city living.

This is a market involving a humongous amount of money, a large number of stakeholders, developers, brokers, contractors, speculators, corporates, and investors. In this report, we will discuss in depth the factors governing the demand and supply side indicators in Mumbai’s real estate market that has a vast number of sub-markets.

2. Factors Influencing Real Estate Prices in Mumbai

In Mumbai, there are many factors that weigh in on the pricing of properties. Economic indicators such as the income levels of the populace, economic activity (which contributes to employment numbers and hence the ability to pay for a house), GDP growth, and inflation are some of the major influencers of the demand for housing products.

On the supply side, land scarcity and various regulatory barriers have become incredibly stringent over the past few years. Due to this, prices of properties can only rise because there is more demand in the market than supply.

Interest rates and the supply of credit also matter, as well as external money being pumped into the system by way of financing developers. Demographics and lifestyle choices are also playing an increasing role in the cost of real estate.

Trends such as longer commuting times that lead to the spread of the population to more distant, yet economical areas of the city or towns; nuclear family formation; and the fashion of living in high-rise apartments are some of the factors that are borne out as demographic variables.

The presence of job markets in different areas of a city resulting in labor migration is a direct factor influencing real estate prices. Infrastructure availability influences real estate prices.

An international airport, a golf course, and a luxury hotel can prop up prices. On the other hand, municipal landfills, hospital waste disposal plants, and leather tanning units can put down prices. Government and municipal policies, capital gains taxation, stamp duties, rent control acts, and of course election results can either further or put brakes on the rise in real estate prices.

3. Comparative Analysis of Real Estate Prices in Different Areas of Mumbai

Comparative Analysis

Despite being the financial capital of India, the cost of living and the cost of investment in real estate in neighboring areas are not even close when compared to the South Mumbai area.

 If we physically divide Mumbai into two areas — north and south — we find stark differences in the socio-economic conditions of people. Such disparities are also reflected in property prices. If we categorize these areas, we find different categories of people residing in each area. South Mumbai is inhabited by elite and strategic executives. People living here do not want to move anywhere because they can afford to stay here.

The newly married elite class also wants to have a residence here with the most luxurious amenities. The pricing is Rs. 60,000 to Rs. 3,50,000 per sq. ft. These prices are for under construction, and in resale, the prices could be seen between Rs. 79,000 to Rs. 4,50,000 per sq. ft. Growing elites are those who can spend everything without any second thought.

Whereas emerging suburbs have also seen investments from their savings, and these flats are mainly owned by middle-class people. Rates are Rs. 20,000 to Rs. 47,000 per sq. ft. or Rs. 1 crore to Rs. 10 crore for 2 BHK. The hot sale items are those flats in the range of Rs. 10,000 to Rs. 22,000 per sq. ft. for Rs. 45 to Rs. 90 lakhs. Areas of South Mumbai that affect pricing include Girgaon, Grant Road, Lower Parel, Dadar, Shivaji Park, Bandra, Khar, Bandra, Kurla, central Mumbai, Mulund, and Thane. The new locations also affected by redevelopment and gentrification projects are Malad, Goregaon, and Borivali. There are many properties suitable for investment.

4. Trends and Future Projections in Mumbai Real Estate Market

Market trends can shed light on what the future holds for the real estate sector. A trend that has been on the rise is the demand for green buildings that operate under sustainable norms.

The number of green-certified buildings in India stands at 1,743, with a bulk of them in the residential sector. Mumbai has a sizable number of occupants who are researching and considering projects with certifications.

Builders are receiving demand for eco-friendly projects, as buyers are becoming aware of how they can maximize the benefits of the high standards of quality of life in green projects. In the vast housing market of a city like Mumbai, technological trends play a major part.

The invention of real estate technology has taken the housing market a big step forward. Technologically advanced houses with smart features like robotic cleaners and online apps are increasing the value of the later homes.

The Mumbai realty market is now home to India’s leading real estate markets. The technological advances available at these markets are putting a spotlight on Mumbai due to the surge of premium luxury real estate across the city. The use of online real estate platforms has been a great incentive for these exclusive buildings and has encouraged consumers.

The present market is now depressed as a result of the pandemic. The housing sector, which has been stable, now displays signs of recovery. However, the pandemic has fixed consumer preferences.

New homebuyers are looking to purchase bigger residences with various facilities on their premises. As the residential market continues to show changes, a demand for such real estate may arise. Analysts generally predict that the cap may disappear within two to five years, but this may or may not happen. Currently, the demand for residential real estate is on the verge of being equal to the prevalent supply, which is yet to be resolved.

This data is based on two years of information available after the lockdown in 2019. Prices generally begin softening as a result of this oversupply and enter a longer-term recession period.

The real estate market is rising, and this could lead to a fast, short-lived steep edge that will further enable the real estate market to become a market that is difficult to navigate.

If involved in real estate bargaining, the Indian government will further increase and upgrade its extensive building virtualization system. In contrast to other metros, it appears that particular areas are promising to improve in property performance.

For example, Navi Mumbai’s job center and new real estate investments and enhancements are two reasons why real estate, including luxury items, can show appreciation in this node.