Monthly Archives: March 2024

Why is the Mumbai real estate market witnessing a resurgence of the Buy Now, Pay Later model?

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Experts claim there has been a recent decline in primary sales in the Mumbai real estate market. Additionally, due to an excess of inventory brought on by the rise in launches over the previous two years, developers have been pushing sales through these various initiatives. 

In the Mumbai real estate market and its environs, more and more builders are reintroducing “buy now, pay later” schemes, which let buyers pay only 10 or 20 percent of the total price up front and the remaining amount upon possession. These programs, which became popular during the 2015-2019 real estate slump, are designed to increase buyer confidence.  

Diminished demand? 

The Mumbai real estate market has seen a spike in launches and a rise in residential property sales over the past four years. 

The Maharashtra government’s announcement in January 2021, waiving half of the permission fees developers had to pay, is credited with this growth. Several developers have had flexible payment options or subsidy programs during the last six months. 

According to experts, this may be due to a decline in primary market real estate sales. Due to excess inventory from the increase in launches over the previous two years, developers have had to offer such schemes to boost sales. 

In the past few months, developers including Wadhwa, Runwal, Ambit, Raymond Realtors, Microtech Developers (Lodha), Keystone Realtors (Rustomjee Group), and Wadhwa have all introduced flexi-payment options. 

For instance, Lodha offers a 255 upfront payment option and a 75% payment option upon receipt of the occupation certificate (OC) for its Thane project. Like this, the Raymond group offers the option to pay 20% in advance and nothing at all until January 2025 in Thane. In November 2023, just in time for Diwali, several projects from the Rustomjee group had flexible payment options. 

Directly from the horse’s mouth

Reintroducing the 20:80 subvention scheme is a calculated move to draw in buyers and speed up inventory offtake, which will increase cash flow and lower carrying costs, according to Rajendra Sharma, Chairman and MD of Ambit Realtors and Developers. 

As a result, according to Navin Makhija, managing director of the company, the Wadhwa Group is providing subvention in projects where the OC is due in three to six months. 

Experts in real estate also credit increased competition for the revival of developer subsidy schemes in the Mumbai market. 

“Developers are forced to provide incentives to stand out and sustain sales momentum due to a high volume of launches. The real estate consultancy firm JLL India’s Ritesh Mehta, Senior Director and Head of West & North, Residential Services & Developer Initiatives, stated that the flexibility of staggered payments “aligns with developers’ robust cash flows post-Covid-19.” 

Listed companies comply with investor requests to release their pre-sales figures every quarter. To create cash flows, developers must rely on banks or find innovative ways to sell their property for less money. First-time homebuyer promises can be used as collateral by developers to secure bank loans, according to RK Mumbai Realtors’ Director Ravi Kewalramani. 

More launches 

The number of units introduced within Mumbai city limits climbed from 25,404 in 2020 to 52,771 in 2023, according to the Maharashtra Real Estate Regulatory Authority (MahaRERA). 

The Real Estate Regulatory Authority (RERA) may soon receive clarification on tax exemptions from the GST Council.

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According to an official, the Goods and Services Tax (GST) Council plans to provide clarification shortly that the Real Estate Regulatory Authority (RERA) will not be obliged to pay the GST.  

The official argues that Article 243G of the Constitution, which addresses the responsibilities, authority, and powers of panchayats, applies to RERA, which acts as both a regulator and a facilitator for the real estate sector. 

To safeguard consumer interests, promote transparency in real estate projects, and create a fast-moving dispute resolution process, several states established RERA.

According to the official, it has come to light that RERA employees are exempt from GST due to discussions regarding the nature of their roles. 

The official went on to say that since state governments fund RERAs, charging GST would essentially be taxing those governments. 

The Model Code of Conduct for the general election scheduled for April-May is likely to be imposed following a meeting of the GST Council, which will be presided over by the Union Finance Minister and include state ministers.  

On October 7, 2023, the GST Council met for the last time. 

A specialist claims that before July 18, 2022, several services offered by significant Indian regulatory bodies were GST-exempt. These bodies included the Reserve Bank, the Securities Exchange Board of India (SEBI), the Insurance Regulatory and Development Authority (IRDA), the Food Safety and Standards Authority of India (SSAI), and the Goods and Services Tax (GST) network. 

The removal of this exemption on July 18, 2022, sparked debate about the tax ramifications for RERA organizations.  

“In addition, the Input Tax Credit (ITC) is not applicable in the residential real estate industry. It implies that eliminating RERA authorities from the GST  calculation may result in lower costs for developers and purchasers of real estate. So industry would greatly benefit from an explanation from the GST Council on this issue,” he continued.  

Real estate trends: Why are wealthy Indians purchasing opulent homes before the fiscal year’s end?

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Real estate experts estimate that the ticket sizes for this year’s real estate transactions range from less than Rs 10 crore to more than Rs 100 crore. 

There was a surge in the quantity of luxury real estate transactions recorded nationally before the close of the fiscal year. The ticket sizes for these properties range from Rs 10 crore to more than Rs 100 crore. Real estate advisors point out that there are financial considerations in addition to the fear of missing out (FOMO) on the most desirable properties in town due to the limited supply of luxury properties, which is one of the main driving forces behind such decisions. 

According to them, one of the explanations might be that several investors who have profited from the financial markets are booking profits by buying real estate in anticipation of possible election-related volatility. 

The range of ticket sizes, which begin at Rs 10 crore and go up to over Rs 100 crore, is another trend that has come to light. They suggested that this might be because of the Rs 10 crore cap on long-term capital gains reinvestment under Section 54F enacted in the Budget in 2023. 

Here are a few recent high-value deals that happened in Mumbai and Delhi-NCR. 

A 10,000-square-foot apartment at the Cameliias by DLF on upscale Golf Course Road in Gurgaon recently sold for Rs 95 crores.

For Rs 10 crore, Bollywood actor Mrunal Thakur and her father bought two apartments from Kangana Ranaut’s family in Mumbai’s Andheri West neighborhood. 

Earlier this year, eight members of the Halan family—investors in stocks and other asset classes– paid a total of Rs 104 crore for four sea-facing twin apartments in K Raheja Corp’s opulent south Mumbai project. The apartments total 16,000 square feet. 

Vratika Gupta, the creator of the well-known decor brand Maison SIA, paid over Rs 116 crore to purchase an opulent apartment in Mumbai’s Oberoi 360 West. 

Demand for luxury homes is not limited to posh areas of Mumbai or Gurugram but also spreads to suburban locations. Krishna Kuppuswami Dasarakothapalli, known for films such as The Family Man, Stree, and Go Goa Gone, bought a duplex in Mumbai’s Goregaon suburb for Rs 30.50 crore this year. 

According to Anuj Puri, chairman of ANAROCK Group, sales of ultra-luxury homes (worth more than Rs 40 crore each) have experienced an unparalleled surge in CY2023, setting new records for both quantity and quality. According to the most recent data from ANAROCK Research, the total sales value of ultra-luxury homes increased by an astounding 281% in CY2023 compared to CY2022.

He continues, “CY2023 has already made Indian real estate history in ultra-luxury property sales before it is over.” 

Additionally, of the 62 ultra-luxury homes sold in CY2023, at least 12 had prices above Rs 100 crore, compared to just nine in 2022, according to Anarock data. In 2023, fifty opulent residences were sold for amounts between Rs 40 crore and Rs 100 crore. There were only four deals in this price range in 2022. 

He continues, “This demonstrates the country’s current appetite for ultra-luxury homes.” 

According to Amit Goyal, Managing Director of India Sotheby’s International Realty, who spoke with HT Digital, there has been an increase in high-end real estate transactions toward the end of the fiscal year.

Many investors who have profited from the stock market are now real estate investors. After all, the stock market is expected to remain volatile during the elections. 

“That is to say that ticket sizes are smaller than last year after the announcement in Budget 2023 and the changes to Section 54 and 54F went into effect,” he added. 

According to him, a surge of transactions surpassing Rs 100 crores was recorded in March 2023 as an increasing number of wealthy individuals utilized their earnings to acquire real estate before April 1, 2023, when the exemption from long-term capital gains tax for buying residential properties was limited to Rs 10 crores.  

According to Ritesh Mehta, Senior Director and Head of Residential Services & Developer Initiatives, West and North, JLL, several buyers are investing in real estate, the majority of which they intend to use for their use and booking profits from the share market.  

“This is one of the causes of the comparatively small ticket size compared to the prior year. Most of the deals in the previous year were above Rs 90 crores, especially after the long-term capital tax exemption for purchasing residential units at Rs 10 crores. Before the end of the fiscal year, most deals in the premium segment range from Rs 10 crores to more than Rs 100 crores,” he said. 

In the future, he says, “the trend is expected to continue.” 

The Mumbai real estate market records a 21% YoY increase in property registrations but a 22% decline in stamp duty collections.

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According to Knight Frank India, residential units comprise 80% of registered properties, with non-residential assets constituting the remaining 20%. 

In February 2024, the Mumbai real estate market recorded 11,742 property registrations, 21% higher than the 9,684 registrations for the same month in the same year. According to data from the Maharashtra government, there has been a 7% monthly increase, with 10,967 properties registered in January 2024.  

However, from Rs 1,112 crore in February 2023 to Rs 865 crore in February 2024, the revenue from stamp duty collections decreased 22% YoY. Stamp duty receipts increased from Rs 760 crore in January 2024 on a MoM basis. 

According to Knight Frank India, a real estate consulting firm that examined the data, the government’s decision to restrict tax deductions on capital gains earned from the sale of residential property after March 31, 2023, is what caused the exceptionally high stamp duty collections last year and the subsequent drop in stamp duty collections. 

Furthermore, eight percent of all registered properties are residential units, with the remaining twenty percent being non-residential assets. 

Mumbai saw the most property registrations in February 2024 compared to any other February in the previous twelve years. Increased optimism and the release of pent-up demand as the pandemic’s effects subsided drove the prior high in February 2022. However, according to Knight Frank India’s report, the recent surge can be attributed to growing income levels and a positive attitude toward homeownership. 

February 2024 saw a rise in the percentage of apartments of 500 square feet or less, from 34% to 45% in the previous year. Conversely, the share of apartments with a floor area of 500-1000 square feet dropped from 45% to 42% last year. 

However, this may be an isolated incident, as Mumbai homebuyers have recently preferred larger apartments, according to Knight Frank India.

Knight Frank India Chairman and Managing Director Shishir Baikal, “The positive trajectory is expected to sustain, particularly  with the anticipated robust economic momentum and the potential easing of interest rates  during the year, creating a favorable environment for homebuyers.”

Where are the houses being sold? 

In the meantime, the combined Central and Western suburbs account for over 73% of all properties registered, as these areas are hot spots for new developments that provide a variety of contemporary amenities and excellent connectivity. 

92% of consumers in Central suburbs and 86% of customers in Western suburbs chose to buy things at their local micro market. According to Knight Frank India’s research, the familiarity of the area and the availability of goods that suit their preferences for features and price also play a role in this decision.