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Mumbai property market stalls in aftermath of terrorist attacks

'The market's gone completely quiet. And we thought the last six months were quiet. Now it is even worse,' said Shiv Kumar Dembla, a property broker who owns Shiv Real Estate Consultants in Mumbai.

The city's residential property sales dropped 21% in the seven months to October, according to estimates from UBS AG. But that was before terrorists held south Mumbai under siege for almost 60 hours, with attacks on luxury hotels, a railway station and a Jewish center leaving more than 195 people dead last week.

Terrorists targeted the foreigners who helped make Mumbai the world's second-most expensive city for offices last year, as companies including Macquarie Group and Barclays Plc sought space in India's financial capital.

Now apartment buyers are walking away and developers may be forced to shelve projects as companies rethink the risks of doing business in India, brokers and analysts said. Vital foreign money is being lost.

In Colaba, the upscale neighborhood in south Mumbai where gunmen stormed into the Taj Mahal Palace Hotel and a Jewish centre, took hostages and fought running battles with Indian special forces, the outlook is gloomy.

'People who were earlier planning to buy in Colaba now want to cancel the plans,' said Narender Bhagwanani, who runs Om Sai Estate Property.

Even before the attack further price drops were predicted because of high borrowing costs and developer's reluctance to cut prices. November sales data when it is published shortly is expected to show an even bigger slide and December is predicted to be devastating. Vital foreign investment is going to be lost.

'Several non-resident Indians who were planning to come later this month to purchase properties have postponed their trips following the attacks,' said Ashwin Mehta, who runs real estate brokerage Astute Acres Pvt. in Mumbai. 'We've gotten hardly any inquiries since last week.'

Some developers have started cutting prices and now more are expected to do so. DLF, India's biggest real estate company, and Emaar MGF Land, the Indian subsidiary of the Middle East's largest developer, have been cutting prices to revive demand.

But sales are unlikely to improve until property prices drop nationally by 25 to 30% according to UBS.

Demand for office and retail space is also expected to drop off. An added danger comes from private equity firms and overseas developers demanding higher risk premiums for investing in India.

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