Mumbai: smaller homes becoming the norm?

November 20, 2017 / By  

While it is important to find properties based one’s requirements, it is also interesting to find out what kinds of residences that have been launched in the market over the past few years to understand market trends. The launch of residential units of various configurations is largely based on the market situation at the time.

We looked at the supply trend of the residential property market among various typologies in Mumbai, Thane and Navi Mumbai to identify which types of residences dominate amidst changing times.

Figure 1: Mumbai Residential Supply – Typology Trend (Mumbai, Thane and Navi Mumbai)
Source: JLL, REIS

Typically, developers tend to launch higher configurations in a residential project to gain maximum profit margins. However, in tough market conditions, the launching of smaller units becomes a necessity for developers as a market response to keep sales momentum up.

Changes in the Floor Space Index in Mumbai

After a lull in residential sales in 2011, the year 2012 started with the new Development Control Rules (DCR) where areas such as balconies, flower beds, terraces, voids and niches were counted in Floor Space Index (FSI). This rule was restricted to the Mumbai municipal limits.

Earlier, these areas were free from FSI and accounted for higher profitability for developers. Moreover, this move forced developers to change the floor plans for the unapproved floors. As a result, the unsold inventory started piling up and developers decided to launch new projects that include smaller configurations such as 1 BHK (bedroom-hall-kitchen) and slightly smaller 2 BHK typologies that received an overwhelming response from homebuyers due to the reduced ticket size.

With longer approval processes because of the newly introduced DCR norms, most of the planned supply of smaller typologies in 2012 got pushed to 2013.

Market sentiment dampened further in 2014

Following the rise of property prices and higher inflation rates, developers continued to launch smaller residences as there was increasing acceptance of such homes by nuclear families living in Mumbai. The share of such typologies increased further in 2014.

In 2015, the prime minister’s approval of the “Housing for all by 2022’’ initiative gave a further boost to the launch of smaller typologies such as 1 BHK. With the residential market desperately requiring revival amid sluggish demand, the launch of smaller residences continued to remain high in 2016 and 2017 following the series of policy reforms by the government.

Smaller homes becoming the norm

With the rising trend of nuclear families in the city, the 1 BHK typology is becoming increasingly acceptable for homebuyers, while a 2 BHK apartment type addresses the requirements of a typical urban family with a husband, wife and two children along with elderly parents in Mumbai, keeping its utility intact. Over the years, the 3 BHK type has remained a good option for families that are upgrading from an existing 2 BHK apartment.

Note: BHK – Bedroom, Hall & Kitchen

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