The Real Estate Mirage: How Builders Got Lost in Their Own Narrative
At the beginning of 2025, a builder in Central Mumbai was quoting a price of Rs 1 lakh per square foot for his homes. Brokers were activated to drum up interest, and the market seemed ripe for a surge in luxury sales. In recent weeks, however, the same builder is now selling those homes at Rs 60,000 to Rs 65,000 per square foot. Optically, it feels as if a discount of around 35 to 40 percent is available, which should be grabbed by buyers. It’s not.
The Rs 1 lakh per square foot was never an attainable price – it was a wishful price, a price attached to misplaced exuberance but distant from reality. This Central Mumbai builder is not the only one with this symptom. As 2025 comes to a close, it is becoming clear that many builders have fallen victim to their own well-cultivated narratives.
Narrative is a very important tool in the real estate business. Homes are sold before they are built, and builders use compelling stories to make buyers believe in the dream they are setting up. The narrative over the past three years was that luxury apartments in Mumbai could command astronomical prices, as India’s wealthy looked for grand opportunities to upgrade to a top lifestyle. Transactions in select projects reported by mainstream media were used as evidence.
There was just one problem: the narrative was vastly exaggerated. Record-breaking deals in luxury apartments were primarily concentrated in just four projects in Mumbai. These deals were a consequence of strong builders having completed projects in micro-markets starved of supply. If not complete, the projects were in locations or plots that were unmatched. Demand was modest, but supply was negligible, allowing those builders with strong leverage to sell homes at prices that hit the headlines.
Headlines have utility for reading but not for undertaking strategy. That’s because headlines, by their nature, report exceptions rather than the norm. Luxury transactions may account for less than 1 percent of the market but more than 99 percent of the headlines. If not kept in context, it can make a player undertake projects in exuberance. Many builders fell for this narrative. Luxury projects became the flavor of the season, with builders undertaking them irrespective of location, plot size, brand, etc. Pricing of Rs 1 lakh per square foot in several locations almost felt like an entitlement. Everyone felt they were Shah Jahan, undertaking their own version of a Taj Mahal.
In a dramatic turnaround, the demand-supply balance has been upended in a short span of time. From negligible supply of ready luxury apartments, Mumbai real estate is now in an over-supply of under-construction luxury apartments. Unsurprisingly, the expectation from builders on prices has been realized. Buyers are in no rush as they see more construction and supply hitting the market. Besides, at the price point being quoted, most buyers see little reason to jump into the bandwagon at an early stage. Many of them are so baulked by the pricing that they have pressed pause on their home purchase plans.
The next step is predictable. As momentum is lost in the housing market, pricing will get slashed to realistic levels in most projects. As with most things in real estate, the price adjustment will happen in a cushioned manner without giving that impression. The alternative is a slow and painful process of sales that experienced builders have seen before and are unlikely to want to repeat. In a way, the episode is a reminder of the power of narrative. It has to be strong enough to convince the buyer but not so strong that it even convinces the builder.
