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Oversupply lowers Mumbai, Delhi realty prices 7-12%

Freny Patel

Property prices in Mumbai and Delhi have dropped by 7-12 per cent in the first quarter of calendar year 2002. With fresh supply of developed land coming into the market this year, real estate prices are expected to dive further.

In Connaught Place, New Delhi, the quoted monthly rent for March 2002 fell to Rs 90 per square foot against Rs 95 quoted in December 2001. In the capital, property prices have slumped, especially in grade A locations, and rental values have fallen by an identical margin.

Nariman Point, the leading business district in Mumbai, saw rents fall from Rs 180 per square foot in December 2001 to Rs 160 in March 2002. Commercial premises in south Mumbai witnessed extremely low demand and vacancies remained high.

The Worli area (in central Mumbai) also witnessed a dip in rentals during the period from Rs 145 per square foot to Rs 125. Rentals in the suburbs of Bandra and Andheri have remained constant, between Rs 75 to 125 per square foot.

Many multinational banks and corporates are setting up call centres and back office operations in south India. As a result, rentals have remained constant in Chennai over the period under review.

The current prices - perhaps the lowest in the past five years since the peak of 1996-97 - have failed to interest corporate India, which has postponed its real estate initiatives, real estate consultants said.

Not only do the property prices reflect the slump in economic activity, they also mirror the oversupply in commercial property as corporates postpone their real estate initiative, stated CB Richard Elli in its report on the real estate scene for the first quarter of 2002.

Companies have postponed their real estate initiative in the light of the cost-cutting measures taken by companies in the old economy, stated CB Richard Elli in its report.

Supply is expected to outstrip demand for property in the coming months. Values are likely to be further depressed once the new supply becomes available by the end of the current quarter, stated US-based real estate consultants, Cushman & Wakefield.

With more good quality real estate coming up in the suburban areas of key metros, there has been an increasing shift away from the central business districts, resulting in high vacancy rates there.

The Andheri Kurla belt in Mumbai is expected to add at least one million square foot of additional developed space in 2002, said a senior official from the real estate consultancy firm.

The National Textiles Corporation has identified 226 acres in Mumbai, 57 acres in Bangalore, nine acres in Delhi and 4.2 acres in Kolkata to convert mill lands into commercial usage. This will further depress the property prices in the key metros.

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