Luxury home prices in Mumbai expected to fall by 1% in 2020: Report

[ecis2016.org] Mumbai’s luxury homes market is likely to witness a price correction of 1% in 2020, even though the city ranked seventh globally in terms of expected rise in luxury home prices, says a report by Knight Frank

Mumbai has been ranked as the seventh global city, in terms of expected price appreciation (in percentage terms) of prime residential properties, according to Knight Frank’s Prime Global Forecast 2020.

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The report also estimated that the prices of luxury homes in areas such as Cuffe Parade, Napean Sea Road, Colaba, Lower Parel, Worli, Tardeo, Juhu, Bandra-Kurla Complex (BKC), Santacruz (W), Bandra (W), Khar (W) and Prabhadevi, are set to fall by 1% in 2020. The buyers of prime residential properties in Mumbai are expected to remain cautious in 2020, due to the deteriorating economic environment impacting market liquidity and an additional 1% stamp duty being levied by the Maharashtra government, taking the total to 6%, it added.

Knight Frank Prime Global Forecast 2020

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* Forecast as at December 2018, new forecast available post UK election; **Manhattan

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According to the Knight Frank Prime Global Cities Index Q3 2019, while Mumbai was ranked as the 28th fastest-growing prime residential market in the world, registering a 0.8% YoY increase in average capital values in Q3 2019, the prices had actually remained stable in the past three months. In the last decade, Mumbai has seen a 12.7% price appreciation in prime residential properties. The change in prime residential prices for all 45 cities tracked by the Index, averaged 1.1% in the year to Q3 2019, growing at the slowest rate in a decade.

Demand and sales of prime residential properties in Mumbai, are expected to see a slight fall, while the supply of luxury homes is estimated to drop significantly in 2020, according to the Prime Global Forecast 2020. The average capital values of prime residential properties in Mumbai currently stands at Rs 64,775 per sq ft, making it the most expensive city for buying luxury homes in India.

Commenting on the report, Shishir Baijal, chairman and managing director, Knight Frank India, said “Despite interest rates remaining low, sales volume of the prime-end of the market, in global top-tier cities, has largely drifted lower during 2019. The prime residential market in Mumbai has also echoed the same sentiment. In India, the segment has now become a business, for only the organised and well-funded players to venture into. Each world region will be marked by different risk sets, vis-à-vis prime properties. Brexit will play as a top risk for Europe, whereas, the economic slowdown and change of property market regulations, will weigh on Asian markets.”

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Paris led the prime residential forecast for 2020, with an expected price growth of 7%, followed by Berlin and Miami in the second place with a 5% growth each and Geneva and Sydney at the third place, with an expected prime residential price growth of 4% each. The report also highlighted the 10 biggest risks to prime residential markets in 2020 as the global economic slowdown, global trade war, local economic slowdown, changes to property market regulations, geopolitical crises, change in government/upcoming elections, emerging market volatility, oversupply of luxury homes, currency instability, Brexit, US Federal Reserve rate changes and commodity prices.

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