Maharashtra Chief Minister announced that new real estate projects which consume c200,000 litres of water supply per day (typically high rise buildings and townships) will not be awarded permissions until additional water supply from the Middle Vaitarna project is available after March 2012.
While the issue is a negative development for Mumbai property developers, we believe the impact will be limited for the following
reasons: 1) large projects (high rises and townships) typically take more than 24-30 months for construction before customers receive product. Hence any new project will incur a limited impact as it would be completed after March 2012; and 2) slum and other rehabilitation projects are exempted from the water supply cut.
This will hurt business volumes in the near term, while existing projects with relevant permissions and approvals are likely to attract premium property pricing.