Originally posted on: 26th May, 2018
Don’t worry, it’s not all properties in Mumbai
To discuss why higher-end residential properties in Mumbai won’t rebound for the next year or two or three one has to discuss:
1) Black Money – Black Money would be used to 70-80% of the transactional value in years past.
2) Demonetisation – In Nov 2016, exactly when Trump got elected, literally within hours, Modi said all 500 & 100 rupee notes would be no longer.
THE ENTIRE MARKET SUPPORTED BY BLACK MONEY AND NOW VANISHED…. Where is the demand?
Nobody wants Crores
We’re not saying that transactions in black money aren’t occurring. It’s just that it’s in Lakhs and not crores and therefore buying a house that is 5-6-7-8 crore these days – one needs white money. People don’t want black money in Crores. WHITE MONEY IS NEEDED….. especially with an overhang of the silly purple looking 2000 rupee note will be taken out of circulation.
White Money is Limited
The truth is according to the tax department a few years ago there were only 150,000 Indians that made over 1cr, 150K usd. So let’s be generous and say it has doubled so that’s 250k to 300K to be generous. Not enough white money demand to support the luxury market in Mumbai.
In short, people don’t want large amounts of black money & finally not enough earn in white money to pay for the housing.
PRICES STAYED STABLE…. What’s surprising is that developers & owners are largely staying stubborn on their prices. It’s a feel real estate prices won’t come off, but this category likely has far more downside 20-30% more from current levels easy.
RENTAL YIELD IS LOW….. was at close to 1-2%, now with prices coming off it’s closer to 3%… prices haven’t come off enough for investors to get excited.
Someone who would disagree? …. Eventually supply will shrink and upcoming glamorous 6-8 cr projects will not be built and thus there will be supply constraints, but this won’t be for another year or two or even four as it takes a long time to get a property completed!
Long term, we are bullish on properties in Mumbai and less expensive residential properties and we are also bullish commercial across the board. But high-end residential in Mumbai…. NO WAY. Not at least any time soon.
Watch the video,
THE REASON TO BUY MUMBAI REAL ESTATE | JAGAHA.COM : https://www.youtube.com/watch?v=Tjec8FAnDGo&t=28s