The nouveau-riche population in Mumbai seeks apartments with amenities like swimming pools, clubs, spas, gardens and recreation centres. This has culminated in a rising demand for luxury flats and rental spaces in the central suburbs. Suburban areas where increasing sales were recorded in the past few months are Wadala, Mulund, Chembur, Goregaon East, Powai, Vashi and Thane. In all these areas, the rates have varied from 2500/- to Rs.6000/-. Although, there are numerous constructions in the Thane area alone, places like Bandra, Worli, Andheri and South Mumbai have also witnessed activity in terms of re-sale and under construction properties. Navi Mumbai is also becoming popular among investors because of its well planned layout and infrastructure.

However, a recent report suggests that real estate prices in Mumbai may begin displaying a downward trend. The prices in Mumbai appear to be stable but the property registrations have dropped by 8%.

It seems that there is not only a slowdown in sales of luxury property, but also a reduction in flat prices. It appears that from Lower Parel to Santacruz, property rates have fallen by 15-20%. The western suburbs like Jogeshwari, Kandivali and Borivali have witnessed a fall of 20%.

Other industry insiders predict that this is a temporary situation and the real estate prices in Mumbai will return to their former glory. This is mainly due to the shortage in supply.

The realty market in Mumbai and the rest of India has been affected on account of global recession, increase in home loan rates and the stock market crisis. This has lead to a 15% to 20% correction in prices. However, this correction is estimated to be of a short-term rather than a long-term nature.

This correction in prices is predicted to affect small developers more as compared to large developers. Experts advise builders to be resilient, reduce their margins and continue selling if they hope to emerge as long-term players in the market.

It is expected that the demand will stabilize by the end of 2009 by an increasing number of residential buildings and by converting mill lands into commercial space

It seems as though trouble is brewing in the luxury real estate market in Mumbai.

Demand from local investors has died down dramatically, and now even the Non-Resident Indians or NRI’s who were major investors in such luxury properties, are cooling off. NRI’s are expecting property rates to go lower, just as the US property market is currently witnessing major changes due to the subprime crisis.

Until around four to five years ago, there were just a few developers who were involved with building luxury homes. However many others joined in, due to the higher margins involved.  These developers entered the luxury sector, without a proper analysis or assessment. Thus now they face an imbalance between demand and supply. In the suburbs of Mumbai, the supply outstrips the demand. In fact it is estimated by Jones Lang LaSalle, real estate consultancy firm, that supply exceeds demand by nearly 25 to 35%.

The NRI investors comprised of nearly 20% of luxury home buyers. And these numbers have dropped. The drop in numbers does not look good for the luxury realty market in Mumbai. Moreover, multiple developers seem to be attracting the same NRI segment. Developers are linking up with banks, who have a list of high net potential people, and are offering them freebies such as free round trip tickets to India, in order to take a look at their properties.

At such times, it makes more sense to attract people of Indian origin. PIO’s are those generation of people, whose forefathers migrated during the British reign, and are now settled abroad. There is a considerable number of PIO’s in Australia, Africa, the UK etc.