Residents of Mumbai Preferring To Stay on Rent
With no visible signs of a meaningful correction in property prices, a growing trend of people preferring to stay on rent in Mumbai. Since December 2010, lease agreements have increased by 20% to touch a new high of 10,191 in June 2011. Sales data from the registration department further speaks for itself. In June 2011, 4,721 sale agreements were registered, down 27% from 6,000 in June 2010. Developers proposing a property hike may well do a rethink.
In June 2011, 4,721 sale agreements were registered, down 27% from 6,000 in June 2010. About 5,000 agreements were registered in June 2009.
Since December 2010, lease agreements have increased by 20% to touch a new high of 10,191 in June 2011. In June 2009, 7,592 documents were registered, while in June 2010, 9,195 documents were registered with the stamp duty and registration department. In February 2011, Mumbai saw 8,055 agreements, compared to 6,704 in February 2010, according to a report by equity brokerage Prabhudas Lilladher, quoting the director general of registrations.
Property brokers agree. “Leases are more of an indicator to demand. The growing trend of leases shows buyers are adopting a wait-and-watch attitude. Buyers are deferring purchase decisions as interest rates are high, in addition to high property rates of about 30%. Staying on rent is cheaper and that’s what I am suggesting to clients,” said Mahesh Ahuja of Aruba Homes. In the past one year, flat rental rates have increased by 10%, as against an increase of 30% rates in outright sale.
Ramesh Nair, JLL managing director (west India), said rent was a preferred option. “Yield income has fallen to 3%. Considering one gets 9% interest on parking the money in the bank, buyers are not interested in purchasing a flat at such high rates, especially when the rental income will barely be able to cover their monthly EMIs,” said Nair.
Boman Irani, Keystone Group MD, and Maharashtra Chamber of Housing Industry secretary, said there was no reason for concern. “Sales are always slow during the rains. In fact, sales dropped 2-4%. With regards to property prices, rates are a factor to demand and supply. If approvals are delayed, supply will be constrained. Prices will automatically rise. The civic chief is making efforts to streamline the system, we hope projects will be approved at the earliest.”
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