Does Mumbai have enough people to buy its expensive apartments?

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
2017 81,127 43,284 10,361 3,682
2018 1,08,256 51,706 11,935 4,254
2019 1,13,569 61,895 15,749 4,872

Source: CRE Matrix

Mumbai’s homes become smaller every year

Apartment sizes in Mumbai Metropolitan Region have been shrinking every year. Since 2011, apartment sizes have been reduced by 22%. The average apartment size today is 717 square feet according to data by real estate advisory firm Liases Foras. Homes in the Island City are the largest. Excluding that pocket which comprises of luxury products, the average home size in the rest of Mumbai falls to a meagre 609 square feet. The smallest homes are to be found in Panvel which is seeing traction on the back of planned infrastructure activity. Developers are opting to cut square feet, rather than cut the price per square feet as a means to make affordable products.