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. Bangalore
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!