With due respect to recent positive reports on Real Estate sector, to
access the situation on ground, I analysed the property market of
south mumbai, an area which is tipped off as the most lucrative area
for real estate companies by most of the analysts. There, I found that
although the picture outside looks great on present basis but behind
the scenes the situation is extremely critical on future basis.

In South Mumbai, the deals are not happeneing while the rates are
increasing every passing quarter. Some of the brokers whose entire
livelihood is on deals, are finding it difficult to survive and are
frustrated at the cartel of builders and investors who are not
allowing the rate to go down. New projects, when launched, are getting
sold off in bulk by builders to black-money-investors at significant
discount and then the other units which are put up in the market for
sale are quoted the price atleast 50 % above the rate sold to
investors. Like this way, every new project in south mumbai is getting
40-60 % booked at the time of launch and other 40-60 % is remaining
unsold for a long time.

The bubble in real estate market of south mumbai is evident from the
fact that even in old depleted buildings (chawls) of thakurdwar,
khetwadi, etc., psf rate on carpet area is now quoting at minimum Rs.
25,000-35,000 which was the rate quoted by posh walkeshwar area 1 year
back. In south mumbai backward areas like thakurdwar, khetwadi, etc.
one is not able to buy even a 200-225 sq. ft. chawl room below Rs. 50
lacs which reflects the gross overhype and bubble of south mumbai real
estate.

If you take an example of recent project launched by Orbit in Girgaum
Area (Prarthana Samaj- Near Sir H.N. Hospital), if one makes an
enquiry, he is told that the project is 60 % booked and the flats are
available from only 29th floor onwards. Only 3BHK are available with
an area of approx 1715 sq ft and approx 2255 sq ft. and the
construction is expected to begin in November 2010. The rate on first
enquiry is quoted at Rs. 35,000 psf on super buil-up basis (carpet
area of flat is 45 % less than super-built-up area). If you go with
the final intention of booking and negotiate hard then the rate
straightaway gets reduced to Rs. 25,000 psf on super built-up basis.
This itself reflects the shallowness of booking as otherwise no firm
reduces rate by 25-30 % if one negotiates and actually buys.

Still, at Rs. 25,000 psf on super-built-up-basis the price for the
minimum area flat available comes to approx. Rs. 4-4.5 cr. Hence,
Orbit is pitching this project as luxurious project. Now, if you visit
the actual site, the building coming up is opposite prarthana samaj
vegetable market which is crowded all the time and is full of unhygine
and mosquitoes. To add, opp. the site of the building there is a BMC
garbage accumulation point where all the garbage from vegetable market
as also from nearby residents gets accumulated. Also, if you just walk
just for 3 minutes from the site towards Alankar Cinema then starts
the Khetwadi Area which is full of chawl-type buildings and each lane
is a distinct mark of unhygine. To go further, if you walk 15 minutes
away from the site beyond Alankar Cinema, there comes Bhendi Bazaar
Area which is extremly dirty and full of bad smells.

Thus, if at such a location of south mumbai one needs to buy a
luxurious flat which has not even commenced construction, by paying
Rs. 25,000 psf on super-built-up basis which works out to approx. Rs.
45,000 psf on carpet basis, this situation is similar to Ketan Parekh
and Harshad Mehta phase of stock market wherein for even HFCL, you
were required to pay Rs. 3000 per share.

This is just a one-off example of bubble-like situation of mumbai and
specifically south mumbai and there are many such other projects even
worst than this one which are quoting unreasonable prices at pre-
construction and construction- stage and are having unsold units for
quite a long time. It is said that when last leg of the market also
command premium valuations, it is the end of the bull phase and start
of a significant correction. Similar is the case with south mumbai
property market where even old depleted buildings, so-called chawls,
have now started quoting a premium for their property in hope of
redevelopment at a later stage by refusing to sell below Rs.
25,000-35,000 psf on carpet basis.

Whether it will be a government-induced curb on prices or a low-actual-
deals-high-supply-driven curb, a significant correction awaits for the
real estate market of mumbai as such bubble can't persist for too
long.

Rgds.