CREDAI-MCHI has unveiled a report that exposes the profound influence of soaring real estate prices, intricately tied to exorbitant premiums, on Mumbai’s economic performance over the past 23 years.
The report opens with a comprehensive examination of Mumbai’s economic trajectory, meticulously tracking the Gross Domestic Product (GDP) over 23 years (2000-2023). This analysis starkly contrasts Mumbai’s international reputation as a financial hub, with the city’s GDP registering a relatively modest 10-fold increase during this period. In stark contrast, cities such as Hyderabad, Delhi, and Bengaluru experienced meteoric growth, witnessing their GDPs surge by 36-fold, 29-fold, and 27-fold, respectively.
The report says developers in Mumbai shoulder an average of Rs 54,221 per square meter as approval costs through various premiums. In stark comparison, cities such as Delhi NCR, Chennai, Bengaluru, and Hyderabad levy significantly lower costs, turning real estate development in Mumbai into a formidable fiscal challenge. This staggering difference leads to Mumbai collecting 25 times more premiums than Delhi NCR, 50 times more than Hyderabad, and 47 times more than Bengaluru for residential real estate projects.
As a result, there is a stark mismatch in the average price per square foot for apartments in the Mumbai Metropolitan Region (MMR) compared to Delhi NCR and Bengaluru. The average cost of an apartment in MMR is Rs 19,485, nearly double that of Delhi NCR and Bengaluru. This discrepancy impedes job access and erodes Mumbai’s competitiveness, discouraging professionals from seeking affordability and safety.
The report argues that the excessive premium rates have a cascading effect on Mumbai’s economy. The exorbitant cost of property is discouraging potential investors, who are now flocking to cities with lower property prices. High approval costs contribute to the city’s already high cost of living, making it even more challenging for residents and businesses.
The prohibitive cost of property acts as a bottleneck for new real estate developments, resulting in a shortage of housing, commercial spaces, and essential facilities.
High living costs, including property costs, are pushing people to seek a better quality of life at a lower cost in other cities. Further, the high cost of property reduces disposable income, leading to a decline in economic activity and job creation.
A 50% cut in premiums would kickstart numerous development projects, injecting new life into Mumbai’s real estate sector. Homebuyers would receive substantial relief as developers pass on the 50% savings, making homeownership in Mumbai more attainable. It would attract more businesses and residents, increasing individual and business taxes and state GST revenue.
Many redevelopment projects currently in limbo due to high approval costs could become viable again.
