According to a survey, low absorption and rising inventories in the residential market in Mumbai may lead to price correction in the early part of 2014.

Nearly 3.2 lakh residential apartments are under development in the city while unsold units stood at 1.8 lakh during the first half of the current fiscal.

The fading real estate prices suggest that long- standing stalemate between buyers and developers is finally turning in the buyers’ favor in recent times. The increase in inventories coupled with weakening absorption levels would put further pressure on prices of the apartments.

Mumbai’s unsold inventory level is almost 46 pc in comparison to Delhi-NCR region’s which stands at 28 pc even with twice the number of units under development in the country.

Owing to low demand, new launches in the city plunged over 45 pc compared to peak levels in 2010 as developers shift focus on settling current inventories.

The residential market has been witnessing a steep downfall in new launches as well as the unsold inventory pressure in Mumbai is the highest among all other cities in the country. We expect a more marked price correction which may drive the market to a better stability.

The current scenario will put pressure on prices in the medium term and the bad phase is expected to last till the forthcoming general polls.

Further, the rise in interest cost and drop in net profit in 2013 will compel developers to lighten load and de-leverage their balance sheets.

 At this condition developers are now trying to recover the situation by limiting fresh launches and boost sales by promotional activities to avoid reducing the base price.