Homes in Mumbai are beyond common man's reach

At a time when the residential real estate industry in Mumbai has hit a plateau in terms of capital value appreciation and sales, a startling fact has come to the fore.
A good 69 per cent of the overall unsold inventory (within Brihanmumbai Municipal Corporation limits) is of units worth more than Rs10 million each. That is, 30,501 units out of a total 44,032 fall in this ticket size.
With land prices only expected to go upwards, there is no stopping this trend. All the launches expected within the city limits in the future too will largely consist of units priced above Rs10 million and upwards.
Consider this: from the number of new launches in Q2 2015, the share of housing units that are worth over Rs10 million each (within BMC limits) stands at 83 per cent. Although the share reduced from 90 per cent at the end of Q1 2015 due to some new launches in suburban locations, it is still overwhelmingly high for a city where only a limited percentage of residents are able to afford ticket sizes of over Rs10 million. This percentage share is expected to go up, albeit marginally, in launches in the near term.
Moreover, in Q2 2015 launches, there is only 3.2 per cent of housing in the Rs3.1 million to Rs6.5 million ticket size and none under Rs3 million ticket size in Mumbai (BMC limits).
Compared to pan-India figures, the numbers are highly skewed towards the higher ticket sizes in Mumbai. Very few units in the affordable range were available from all these launches and mostly were in the suburban locations. Even if the overall inventory is considered, there is very little stock in the affordable range (Rs6.5 million and below) in the city.
Let's look at how unaffordable housing has become in the city. The normal multiplier should be six times of the annual household income; in other words, it should take six years' salary to own a house.
Taking the weighted average of ticket sizes in Mumbai city, we get a number slightly above Rs20 million. Resultantly, at an annual income per household of Rs750,000, it will take 27 years for a person to afford an apartment worth slightly over Rs20 million in Mumbai. For a house worth Rs10 million, it will take 13 years.
To suit the budget of a majority of home buyers in Mumbai, developers have been steadily reducing average unit sizes over the last few years and will continue to launch smaller-sized apartments for the same reason. The reduction in average unit sizes has been the highest in Mumbai at 26.4 per cent from 2010 to Q1 2015. The average unit sizes have been the lowest among Indian cities.
The writer is the chief operating officer and international director, JLL India. Views expressed by him are his own and do not reflect the newspaper's policies.