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"Negotiations for the last 3-4 quarters are more skewed towards the customers. I am sure that there are so many promotional benefits given and if one quantifies it, there is already a 5-10 percent discount in the market and 5-10 percent sometimes is quite large as well," explains Das.
On how the realty markets are in the city, Das says Mumbai has a very mixed market currently with Navi Mumbai seeing big inventory built up and Dombivli and Kalyan seeing a good jump.
Below is the edited transcript of Das' interview to CNBC-TV18.
Q: Why are realty prices not going down if there is 9 quarters of unsold inventory?
A: It is 9 quarters now. The most important part is it has gone up from 5 to 9 so that is actually very significant. In Mumbai it is very difficult for the developers to really bring down the catalogue prices. What we see is when negotiations are done, negotiations for the last 3-4 quarters are more skewed towards the customers.
I am sure that there are so many promotional benefits given and if one quantifies it, there is already a 5-10 percent discount in the market and 5-10 percent sometimes is quite large as well.
Q: Are we going to see bigger cracks in prices or are builders getting together and holding prices up?
A: The fact is the builders are definitely holding prices and it is very difficult to really estimate when prices are going to crack. It may not crack at all.
Q: So much of this land has been bought at historically high prices in 2006-07.
A: But the point is, land is always a working capital for the developers, so as soon as it is used it has to be replenished at the market price which has skyrocketed.
Q: Indiabulls Real Estate told us that they have been able to get very good realisations on their Mumbai properties. They have given us prices which do not seem too low. Can you tell us if there are specific builder groups that are more impacted than others because they are holding onto larger inventory?
A: It is not like that, because holding has a cost as well. If companies have the capacity to hold, they are holding. It is very difficult to pinpoint one particular developer. It may happen in particular projects that companies hold and sales are realised.
Certain projects are showing fantastic sales in the pre-sale advertisements. So it is very mixed market in Mumbai now, but overall if you go by the new launches, the downward trend, it is a free falling trend. If one goes by the sales, the free falling trend is with moving averages that we have seen in long-term as well as short-term.
Why we took the short-term is because we wanted to see whether there is any trend reversal that is also showing a downward trend.
Q: Specific areas in Mumbai where you are seeing more inventory build up than others, therefore you might see price decline and therefore builders that are specific to those areas might be most impacted.
A: Specific micro markets like Navi Mumbai definitely has lost sheen and there is inventory build up there. Same is the case with some parts of western suburbs- starting from Bandra till the north of Dahisar.
We have seen an uptick in demand actually in central suburbs. Central suburbs is one place wherein you have Lower Parel and all those places. The major absorption that we have observed is central peripheral, north of Thane like Dombivali, Kalyan followed by big jump in launches as well.
Q: When the crack comes in realty will it be sharp if for some reason they are not able to hold out?
A: I do not think it will be sharp. Because builders in Mumbai can hold and they will do it in a very phased manner. They have that capacity. That is my experience.
Q: As you have been pointing out commercial real estate is having a far better year than residential is. Your report points out that while banking properties have suffered a little bit - IT, ITES and the manufacturing sector are buying up or renting out properties and that has helped the commercial end hold up. Your quick response to that?
A: If you see Mumbai - historically it was a diversified portfolio in terms of office space and sales or leasing. IT, ITES were not much at that point in time, it was manufacturing, other service sector, BFSI. In the middle BFSI really took a very good hold of Mumbai market, but now what we are seeing is IT, ITES is also picking up. If you see a long-term sales and lease you will see IT, ITES at par with BFSI in terms of share of leases in million square feet and manufacturing as well - manufacturing is there, I mean the non-factory side of manufacturing. So Mumbai is a very balanced portfolio we are having as far as office space is concerned and it will hold to 2012 levels.
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