As per our research and analysis of data provided by few government agencies, there are around 25 Lac houses vacant in Mumbai city alone. It is alarming that Mumbai, the city of slums and homeless, has such a high level of unused flats. In this figure, there is also a very small percentage of flats which are unused because builders couldn’t sell them at their desired price.
We, at RealEstateDealStreet.com, researched on this and found out few reasons for high real estate prices and few solutions as well.
Black Money:- One of the foremost reason for this mess or madness is that almost all the corrupt politicians, business men and bureaucrats from whichever part of the country, have parked their money in Mumbai’s real estate market. This could be either because they think they can invest big amount of unaccounted money in one single transaction, and/or it may seem to them as a good opportunity in a lucrative and crowded market. These types of people generally don’t let out their properties for confidentiality reasons.
Manipulative Rules by Housing Societies: - Almost all the housing societies have their own set of rules. Society’s office bearers manipulate law to benefit their own selfish interest that discourages prospective owner’s to rent out their property.
High Transaction Charges: - Mumbai has highest transaction charges while renting out property in
India, if not
the world. The owner has to pay good amount of money to the society, govt.
agencies and high broker commission.
Properties under Litigation: - In Mumbai lot of properties are under litigation, either because the property was pledged to banks for loan and the owner couldn’t pay banks due, or because of a family dispute between legal heirs, or dispute between two or more than two parties owning the property.
Loopholes in Law: - Tenants misused Indian legal systems in their favor , the repercussions of which lead to property owners being wary of renting their apartment.
Lack of Property Management Services:- The Indian real estate market doesn’t provide property management services to two or less than two property owners.
These owners don’t know how to market their property and rent out. NRI’s are most affected by this.
Inflexible Markets:- Mumbai has the most inflexible real estate market in the world. Here, once the builder has sold the apartment, he will never think about that particular building or locality again. The same applies to the local development authority. They are not flexible enough to take changing market dynamics into account and change as per the market. Cuffe Parade and Nariman Point are prime examples of that. In both these locations there is a 60% occupancy in commercial segment and almost 100% in residential.
Unreasonably Heavy Taxes: - Sometimes, in the process of getting the maximum out of something, the Indian authorities kill the golden goose. Nariman Point is a striking example of this. The Municipal corporation has raised taxes to the extent that they are even higher than the rent, a lessee can get. Now the matter is in the court and all the stakeholders are wasting their time!
Due to these factors, Mumbai is slowly becoming an uncompetitive city compared to its national and International peers. MNCs are setting up their offices in Gurgaon which was unheard of, some decades ago.
became the Silicon Valley of India for start ups.
In next post we will discuss how to handle the above mentioned issues and make Mumbai again the city of enterprising people where even exchequer shall gain.
We also look forward to hearing from you so do share your thoughts by dropping a comment here!