During the past two quarters, property prices were being jacked up by various builders across the metropolis. However, customers are not biting, and realty prices may be in for a correction in the months ahead

Finally, prospective homebuyers can heave a sigh of relief. In the second quarter, property prices in Mumbai have stagnated - and in some cases, they have even come down, according to a report from property consultancy firm Knight Frank.

This is in sharp contrast to the previous two quarters where property prices in Mumbai had seen steep hikes as developers were trying to tap into what they perceived to be dormant pent-up demand during the worldwide recession.

According to the data provided by the consultancy firm, property price appreciation was seen in only a few micro-markets in Mumbai. The maximum appreciation was in Goregaon (a western suburb), where prices increased by 6%. Both Goregaon (East) and (West) saw an increase of Rs500 per square feet in the second quarter compared to the first quarter. Locations in prime areas in south Mumbai - such as Walkeshwar and Malabar Hills - saw a slight increase of only 4%-5% in prices (of about Rs2,500 square feet) during the same period.

Besides, there wasn't any price appreciation seen in the central suburbs and the satellite city of Navi Mumbai, considered to be some of the fastest-growing zones in and around Mumbai.

In Malad, considered to be a prime western suburb, the prices of property have declined by 9% (or Rs750/sq ft to Rs7,500/sq ft).

The report attributes the stagnation in Mumbai real-estate prices to flagging demand from consumers due to the abnormal rates that were being charged by builders. "Consumers have made it clear that they will not pay over the odds for apartments and consequently developers have been coerced to stop rapidly escalating property prices in Mumbai," said the report.

A real estate expert, preferring anonymity, told Moneylife that real-estate prices being quoted do not actually reflect the true picture. He said, "There is demand, but the price the builder is quoting is not matching with the purchasing capacity of buyers. Besides, builders are not selling property at the prices which they are quoting. They are selling at discounted prices behind closed doors. Also, the funds the builders have been able to generate from multiple sources have enabled them to hold prices high, which is (again not) sustainable."

What's more, builders are coming up with lucrative schemes to push sales in the residential segment. Among their tactics is making a '10:90' offer (see: http://www.moneylife.in/article/4/10186.html).

Earlier, the real-estate market experienced an alarming rise of about 30% in certain Mumbai micro-markets during the first quarter of this year, resulting in a decline in sales by 50%-60% (see: http://www.moneylife.in/article/4/8844.html).

Besides, the Knight Frank report says, "Similar to 1Q 2010, 2Q 2010 saw a fairly low number of inquiries and transactions in the Mumbai micro-markets. While there were some large transactions, the overall volume of transactions decreased further during this quarter. However, there were a few noteworthy projects that were launched in 2Q 2010."

The real-estate market focussed more on higher valuations and raising funds through the capital market than on end-user sales, according to Pankaj Kapoor, founder and managing director, Liases Foras, a real-estate rating and research company.

However, according to the report from Knight Frank, not many real-estate companies have gone ahead with their plans of venturing into the capital markets because the performance of the listed companies discouraged them from doing so. The returns generated by the stocks after listing have been below investor expectations, the report said.

In terms of rental values, there has been no price appreciation noted in the second quarter compared to the first quarter of 2010.

It remains to be seen if prices will come down even more from the current astronomical levels so that prospective customers will finally be able to afford a place in the metropolis - and beyond.