The two biggest reasons why Mumbaikars aren't buying are expectations of a decline in prices and lack of confidence in the developer's ability to deliver.

With a little over one lakh residential flats lying unsold in Mumbai, an inventory which will take more than three years to clear as not much of it is available for immediate possession, consumer resistance in Mumbai's real estate market is peaking.

Sale of Mumbai apartments in the financial year 2012 dropped by more than 60 percent from its peak in 2007 and 35 percent from 2011, according to data from property research firm Knight Frank. What's worse, of the market average of 80,000 units, only 45,000 apartments were sold in the Mumbai Metropolitan region during 2011-2012.

When buyers are not biting, it also implies gloom for investors who buy more than one flat because they expect good appreciation. From the looks of it, even investor sentiment has turned bearish as interest rates are high, regulatory approvals are stuck and developers are not being able to deliver the returns they had earlier promised to PE investors.

Surprisingly, even resale homes - usually cheaper than new property - aren't selling for want of buyers. "I have been trying to sell my flat in Goregaon at a 20 percent discount, but even at Rs 70 lakh there are no buyers," says Amit Ghoshal, a Mumbai-based resident.

The two biggest reasons why Mumbaikars aren't buying are expectations of a decline in prices and lack of confidence in the developer's ability to deliver.

This is also evident from loan growth at India's housing finance companies. Loan growth at LIC Housing Finance has slipped to 17 percent in 2011-12 from 28 percent a year ago, forcing the company to set a lower target of 20 percent for the current fiscal.

"The sharp rise in interest rates, high property prices in some locations and economic slowdown have resulted in a meaningful reduction in demand for housing in the two biggest cities, Delhi and Mumbai. Were rates to continue at these high levels and the economic environment were to deteriorate significantly we could see growth rates for the housing finance companies (HFCs) coming down", noted Esprito Santo Securities in its latest report .

With the financial situation worsening thanks to poor infrastructure and economic slowdown, Mumbai has slipped behind Pune and NCR in the mortgage market too as record realty prices keep customers away.

"Lending in Mumbai has come down. Prices have shot to unsustainable levels," VK Sharma, MD and CEO, LIC Housing Finance, was quoted as saying in the Economic Times. "The real estate market is under stress. New projects are not coming up and existing ones are getting delayed. Also, with prices at this level, expectation of returns has also fallen."

Apart from losing its top position in home financing, recently real estate data firm Qubrex replaced Mumbai with Noida as the second-most sought after real estate destination, citing better price appreciation in three years, emerging connectivity, potential growth in economic activity, nationally reputed builders, infrastructure and low land acquisition risk.

"Currently the price range in Noida is attractive and that is driving investor demand. In Mumbai, or Mumbai Metropolitan Region (MMR), new project launches in the last 18 months have not been attractive/large/affordable," Om Ahuja, CEO - Residential Services, Jones Lang LaSalle India, told Firstpost.

Mumbai has also become unattractive since it caters to mid-to-high end segments while low-income homes are difficult to find. According to Pankaj Kapoor, Managing Director at property consulting firm Liasas Foras, 80 percent of the demand for residential homes is in the Rs 45 lakh to Rs 70 lakh segment. But supply to meet this demand exists only in the far-flung suburbs of Panvel, Neral, Dombivli, Badlapur and beyond - where infrastructure and community life is weak, and the daily one-way commute to Mumbai can take as much as two hours. This essentially means no affordable homes exist in Mumbai and its immediate closest satellite towns of Navi Mumbai and Thane.

Says Mudassir Zaidi, Regional Director at Knight Frank, "In Mumbai, the problem is space. Most offices and business centres are either in the centre or on the Western Corridors. Areas like Navi Mumbai are developed, but the business community hasn't taken to them yet."

On the other hand, areas like Noida and Gurgaon, despite being suburbs, are independent cities in themselves with proper infrastructure, offices, schools and all other amenities. And the average ticket size of a property here costs anything between Rs 25 lakh and Rs 75 lakh.

"There has not been any dramatic governmental initiative to improve infrastructure in Mumbai compared to Noida. Inventory in specific areas has piled up but in key areas the scenario is quite different. There are always buyers for the right product, right location and right price," explained Ahuja.

But the biggest game changer has been expectations of capital appreciation and development.

"Mumbai is an investors' market, but investors in times of slowing economic conditions are looking for other options to invest, instead of heated-up markets," Anshuman Magazine, head, CB Richard Ellis, was quoted as saying in Business Standard.

And there is the magic of infrastructure and development.

An era of development has already begun in Delhi NCR with the opening up of the Yamuna Expressway. Property experts believe that that realty market in the region is going to witness a boom and the NCR and western UP belt will become a hot destination for home buyers and investors. In the last one year, property prices have shot up 30 percent in Noida and Gurgaon and 38 percent in Greater Noida. This is expected to rise another 30 percent this year.

Against this, property prices in Mumbai have more or less remained stagnant in the last one year, with many developers being forced to offer discount schemes to lure buyers. This is of course in the high-end segment. Secondly, infra planning has been a major flop show in the city. The Chembur to Jacob circle monorail project and the Mumbai-Trans Harbour Link have already been delayed and so is the elevated road near the Chhattrapati Shivaji International Airport. There's no word on the Navi Mumbai airport, which has run into land-acquisition problems now.

Mumbai can get back into the game only if the affordability factor is first addressed. Without real buyers, realtors cannot hope to push sales.