This is over and above the four to five per cent drop in prices seen in 2018.
MUMBAI: The prices of luxury residential homes in Mumbai are expected to decline further in 2019 amidst a severe slump in demand. A report by property consultant Knight Frank on real estate trends titled “Global Outlook 2019” said that luxury home prices in the city would drop five per cent in the current year. This is over and above the four to five per cent drop in prices seen in 2018.
Industry experts said that the speculative money, which once dominated the city’s luxury home segment, has almost disappeared. “It happened because of multiple reasons,” said Arvind Nandan, executive director - research, Knight Frank India Pvt. Ltd.
“A couple of reforms to improve transparency like the Real Estate (Regulation and Development) Act and Benami Property Act have made the play of speculative money difficult. Secondly, with short-to-medium term return expectations from real estate remaining subdued, the speculative capital has diversified into other asset classes seeking higher returns,” he said.
Last year, the liquidity crisis faced by non-banking finance companies (NBFCs) - which are among the key sources of funding - also impacted the real estate sector. With buyer demand remaining robust in the mid- and lower-middle segment, developers have also shifted their focus towards projects costing less than `50 lakh per unit.
Globally, Knight Frank noted that luxury home prices are now a distinct asset class, a safe asset viewed by the wealthy as a viable alternative to government bonds.
However, local policy interventions and economic shifts have the capacity to disrupt these ties. While its Prime Global Cities Index, which tracks the movement in prime prices across 43 cities world-wide is still rising, Knight Frank said it is happening at its slowest rate since 2012.