Mumbai realty halts

Bloomberg

India's worst terrorist attack in 15 years has caused Mumbai's property market, already faltering in a slowing economy, to grind to a halt.

"The market's gone completely quiet," said Shiv Kumar Dembla, a property broker who owns Shiv Real Estate Consultants in Mumbai. "The future doesn't look bright either. The last six months were quiet, but now it could get worse."

The city's home sales dropped 21 percent in the seven months to Oct. 31, according to estimates from UBS. That was before terrorists held south Mumbai under siege for almost 60 hours, with attacks on luxury hotels, a railway station and a Jewish center leaving more than 195 people dead last week.

Terrorists targeted the foreigners who helped make Mumbai the world's second-most expensive city for offices last year, as companies including Macquarie Group and Barclays sought space in India's financial capital. Now, apartment buyers are walking away and developers may be forced to shelve projects as companies rethink the risks of doing business in India, brokers and analysts said.

Mumbai, which accounts for a third of India's taxes, is home to the nation's central bank and primary stock and commodity exchanges, as well as its largest companies and the local headquarters of overseas firms such as Citigroup and Barclays.

The city is the world's sixth most-expensive in terms of apartment rentals, and ranks second in Asia behind Hong Kong, according to a survey released by ECA International in April.

"Rentals in Mumbai have climbed up steeply over the past few years," Mridul Upreti, joint managing director for capital markets at commercial property broker Jones Lang LaSalle's local unit, said in an interview in New Delhi on Dec. 2. "In the short term, residential prices are going to correct."

Registrations of new homes in Mumbai dropped 35 percent in October from a year earlier as a slump in demand gathered pace, according to UBS analyst Suhas Harinarayanan. November sales data could be worse, he said.

"Several non-resident Indians who were planning to come later this month to purchase properties have postponed their trips" following the attacks, said Ashwin Mehta, who runs real estate brokerage Astute Acres in Mumbai. "We've gotten hardly any inquiries since last week."

Demand for housing in south Mumbai was already under pressure because of high borrowing costs and developers' reluctance to cut prices, Macquarie Research analyst Unmesh Sharma wrote in a note to clients Dec. 1. An October auction for land near Mumbai's emerging financial district of Bandra-Kurla Complex, home to Citigroup, ICICI Bank and the National Stock Exchange, lured just one bidder. Mumbai officials also had to twice defer plans to lease two plots of land for offices in a north-central suburb because of slack demand.

Mumbai, along with New Delhi, will continue to be harder hit by the economic slowdown partly because of their dependence on the banking and financial services industry, Sandeep Mathew, an analyst at BNP Paribas, wrote in a note to clients yesterday.

An index tracking 14 Indian real estate stocks has slumped 87 percent as a five-year rally in property prices ended and the crisis choked off funding for developers.