As per a report by Knight Frank India, absorption of residential units in Mumbai is expected to improve because of infrastructure development Over the last two to three years, India’s economic health had deteriorated. The conditions of the Mumbai Metropolitan Region (MMR) residential property market, too, did nothing to lift the spirits. The shrinking size of the market in terms of demand and supply in this segment confirmed the misfortune of the region’s residential market. After a decline of 14% in demand last year, the region witnessed a 25% fall in demand in the first half of this year as compared to the same period last year. While the government’s policy hiatus slowed the economic engine and impacted buyer sentiments in 2013, buyers continued to sit on the fence for the most part of the first half of 2014 in anticipation of the new and stable leadership at the Centre reviving the ailing economy. Taking cognizance of the weak consumer appetite, developers adopted several measures, ranging from the 20:80 financing scheme and rent back scheme to waivers on stamp duty and registration, in a bid to revive sales. Eventually, the developers attuned their strategy to the changed market scenario. The resultant impact on the launch of new housing units was a decline of 10% in 2013, followed by a stagge ring 38% decline in the first half of 2014, according to Knight Frank India Real Estate Outlook report JanuaryJune 2014. The assessment over a longer periodhighlights the contraction of the MMR residential property market. The long-term (eightquarter) trend line captures the declining momentum; the decline is sharper in the short-term (four-quarter) trend line that captures the four most recent quarters. In the case of new launches, the long-term trend indicates a contraction of 22% in the quarterly absorption rate between the fourth quarter of 2011 and the second quarter of 2014, whereas the short-term trend has shrunk by 24%. In the case of absorption, the size of the market has dwindled by 28% in the long-term trend and a steeper 34% in the short-term trend during this period. The unabated demand-supply gap in the MMR residential market has created a pile-up of unsold inventory, which now stands at 2,13,742 dwelling units. The MMR is a growing urban agglomeration and the second largest residential market in the country. Hence, the assessment of the health of this market has to be done by comparing the inventory level with the rate of sale. The quarters-to-sell (QTS) ratio indicates the time period required to clear the inventory. The QTS ratio for the MMR has more than doubled in the last ten quarters, from being 5 in December 2011 to 12 in June 2014, implying that the unsold inventory will take almost three years to sell at the average absorption rate of the preceding eight quarters. A sharper decline in demand as compared to supply has resulted in such a precarious inventory pileup. While the inventory two years ago was mainly on account of underconstruction projects, the share of ready possession projects is rising this time around. Opportunistic investors, including some private equity fund firms, have started to exploit this new investment avenue. While the state of affairs of the Mumbai region’s real estate market continued to remain in the doldrums in the first half of 2014, this period has seen significant completion of transit infrastructure that has the potential to alter the dynamics of the region’s property market, the most significant being the completion of the Versova-Andheri-Ghatkopar corridor of the city’s first metro rail. Covering a distance of 11.4 km, this efficient and comfortable urban transport system has boosted the west-east connectivity in the city considerably by reducing the travel time from 1–1.5 hours to 21 minutes. Another significant project that has reached completion is the Chembur-Wadala corridor of the city’s first monorail. An efficient and convenient form of transport, the monorail is suited to operate in crowded and narrow roads where the metro cannot be implemented. The benefit of this first phase, which covers a distance of 8.9 km, is limited at present because it does not connect any employment hubs. However, once the second phase of 11.2 km connecting Wadala and Jacob Circle is operational by 2016, this monorail link will become an important transit corridor from the perspective of the realty market,according to Knight Frank India Real Estate Outlook report January-June 2014. The Eastern Freeway, a 16.8 km controlledaccess highway connecting the GhatkoparMankhurd Link Road to PD’Mello Road, also became operational in the first half of 2014. The first of its kind, this transit project has enhanced the connectivity of the central suburbs with south Mumbai significantly. Improving connectivity with the employment hubs of Nariman Point, Colaba and Cuffe Parade, this infrastructure development has increased the north-south connectivity of the region. The Santacruz–Chembur Link Road (SCLR), a 6.5 km arterial road connecting the crucial Western Express Highway (WEH) and Eastern Express Highway (EEH) at Santacruz and Chembur, respectively, is another milestone project that became operational in the first half of 2014. The SCLR has improved the west-east connectivity significantly by cutting the travel time between Santacruz and Chembur from an hour to 20 minutes. While these four important projects have come up within the Mumbai city limits, they are redefining the property market dynamics of the entire metropolitan region. On account of high residential property prices in and around office markets, a large section of the region’spopulace travels from the suburbs and peripheral suburbs to their workplaces. The travel time in most cases ranges from 30–60 minutes for road travel and 60–120 minutes in the case of suburban train travel. These new infrastructure projects have shrunk travel time for people who stay in the affordable peripheral suburbs and commute to work in the city. In effect, they have increased the acceptability of residential markets in the peripheral suburbs. Another critical factor that has contributed to the acceptability of the peripheral suburbs is the development of new office projects towards the north of the city, mainly in the western and central suburbs. Hence, these two dominant factors of infrastructure development and access to employment opportunities will determine the fate of the residential property market in the foreseeable future. With a new, stable government at the Centre, stakeholder sentiment has witnessed remarkable improvement. The first budget under the leadership of prime minister Narendra Modi offered several positive surprises to the realty sector, with special focus on housing. The BFSI and IT/ITeS sectors – dominant employers in the region – have indicated their increasing optimism for business in the financial year 2015. Considering these factors, after a dull first half, there is every possibility of new launches. The absorption level also witnessed a 37% drop during the same period. Nearly 28,500 residential units were sold in the first half of 2014, which is a tad higher than the lowest-ever half yearly sales volume (26,000 in the second half of 2013) since the year 2010. Absorption is forecast to increase by 17% to 30,500 units in the second half of 2014, compared to the same period in 2013 On the residential price front, while the weighted average price in the MMR increased by 4.2% in the first half of 2014, the forecasted increase for the entire year (2014) is 10.1%. The prices of residential properties in and around office markets is fairly steep and cannot be afforded by the average Mumbaikar. To cater to the housing needs (budget) of these people several residential hubs have sprung up in the suburbs. With the recent completion of transit infrastructure, the acceptability of these suburbs has visibly increased.The development of new office projects in the suburbs has also augmented its residential real estate prospects