Why Mumbai real estate is in a crisis?
- Average cost of a new apartment: INR 1.5 crore to INR 2 crore
- Downpayment of 30% by the home buyer
- Home loan of atleast INR 1 crore
- EMI of approximately INR 75k
How many households can afford paying an EMI of INR 75k?
- ~ 15,000 households pay rent between INR 50,000/month – INR 100,000 month
- ~ 20,000 households pay rent in excess of INR 50,000/month. These households can stretch themselves and instead purchase an apartment
- ~ 60% of rental agreements involve a rent of less than INR 25,000/month
- Leakages exist in rental data: Many do rental agreements for multiple years, few don’t even do agreements, some pay a component in cash etc
- Assuming these leakages, yet number that can afford a home will not exceed 50,000 households
- First-home buyer demand impacting replacement and upgrade demand
- Trend moving towards ready and resale apartment
- Unsold primary inventory of over 100,000 units
Is it a surprise that Mumbai real estate is in a structural crisis?
NUMBER OF HOUSEHOLDS PAYING RENT ACCORDING TO DIFFERENT SLABS
|Monthly Rent||< 25k||25k – 50k||50k – 100k||> 100k|
Source: CRE Matrix