Mumbai has for long been a major real-estate hub, especially for the luxury sector of the industry. However, the luxury projects have now turned out to be bad investments for those who bought a property in Mumbai there hoping to earn lucrative returns. It had been expected that property prices would rise and they could earn both rental income and high resale value.
On the contrary, the prices have dropped, and they now fetch far less rental returns than expected. Lately, a large number of luxury housing projects have been developed in Mumbai, resulted in a large number of options for the buyers. This, in turn, has caused a fall in rents by up to over 30% in some cases.
Moreover, the taxes on rental income take away a chunk of the returns earned by the homeowners. According to the analysis, homeowners who invested in high-end projects barely earn enough returns. For example, one can earn INR 1 lakh a month by putting a home worth INR 5 crore on rent. But after deducting the taxes, maintenance charges and the outgoings, the owner is left with around INR 56,000.
According to a broker, the rents have gone down by at least 20% in Mumbai, in some cases almost 33%. He also added that even though an owner can earn a monthly rent of INR 4.5 crore from a home worth INR 20 crore. But on the deduction of taxes and other charges, he/she gets only INR 2 lakhs a month.
However, certain localities have turned out to be exceptions, especially the ones close to commercial and employment hubs. Rental income in regions near Goregaon, BKC, Lower Parel, Airoli, etc. has witnessed a 3% to 5% increase in rental returns. This is because the commercial sector in Mumbai keeps growing, and attracts migrants. Many people who come to Mumbai seeking jobs or business opportunities look for rental accommodation, making the localities near commercial hubs great for investment.
However, it is to be noted that homes that fall into a more affordable category are earning great rental value. 1 BHK and 2 BHK homes are especially high in demand among home renters. The owners of these properties can not only find tenants easily, but the high demand also results in lucrative returns. Compared to the costs, the rental returns of these homes are quite profitable. This is noticeable, especially in the Bandra-Khar region.
This scenario is, of course, a good opportunity for the home renters, as they are now able to rent homes at a much-discounted cost. But the owners of luxury homes are in a really tough situation as the rent they are earning is nothing compared to the costs of the properties. In the last few years, the real estate industry in Mumbai has indeed slowed down, with a fall in sales. However, with the government announcing relief funds and reforms to help the sector revive, the sales for Flats in Mumbai is expected to increase,
Evidently, the high-end properties in only certain localities in Mumbai are good for investment.