Why are Property Values so Expensive in Mumbai?

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The property rates in Mumbai has always been a hot topic for discussion and has always been in the news. The ever – increasing rates of properties in Mumbai makes it very difficult for the middle – class people to afford it. Now to understand this phenomenon of expensive rates of the properties in Mumbai, one needs to do detailed analysis of the two primary variables of real estate which are demand and supply.

Factors of the Supply Side

Geography – It is one of the most primary factors that play a crucial role in the astronomic prices of real estate in Mumbai. Being surrounded by water on the three sides, the development in Mumbai have always been linear or one directional from south to the north as compared to other Indian cities where development is also circular. Thus, a combination of the factors of distance from the southern city centre to the suburbs along with the lack of infrastructural facilities for the connection of north and south has led to the increase in the property rates in Mumbai.

Policies of the Government – The policies of the government in terms of the ready reckoner rates is one of the important factors that is responsible for the high prices of property in Mumbai. For example, one can see that in the recent years of 2013 to 2015 the government has increased the ready reckoner rates by 15 to 20 percent throughout the city.

Locked Land – Some of the significant amount of land is strictly restricted which is locked in slums and the run – down buildings which makes those land unavailable for use in the real estate sector.

Infrastructure Deployment is Low – The slow progress on the infrastructure of the city has not allowed it to open up the avenues of new pieces of land for the purpose of development.

Factors of the Demand Side

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The Activity of the Investors – High activity by the investors plays a vital role in the steeping up of the prices of real estate in Mumbai and most importantly the non – resident Indian investors constitutes a significant part of the investment in the real estate sector in Mumbai. The main reason behind this is because of investment in properties such as villas, resorts and luxury apartments in Mumbai offers much better returns as compared to any other cities in India or the investor’s city of residence abroad.

Huge Inward Migration – Everyone tries to think of better opportunities and Mumbai being the financial capital of India there are a plethora of opportunities. This makes people from all over the country come to Mumbai in search of a better future. As a result of this heavy migration of people to Mumbai, there is a crunch in the accommodation facilities which makes the prices of real estate go higher and higher.

Increase in the Number of Local Nuclear Families – Mumbai has been the commercial capital of India for over a hundred years and has attracted the educated population for years. Now, the current generation of people prefer nuclear family structures which necessitate the demand for additional homes, thereby contributing to rising property prices.

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