According to the prime global cities index by property consultants Knight Frank that tracks luxury residential trends in 23 key global cities, the Mumbai luxury market has registered the maximum dip at 18 per cent.

The properties in the premium segments include the top 5 per cent of the housing market in every city. In Mumbai, these are projects that command upward of Rs 50,000 per sq ft.

These include super-luxury projects in the plush areas of the island city such as Napean Sea Road, Carmichael Road, Altamount Road, Peddar Road, Breach Candy and Malabar Hill. Property analysts point out that the reason for prices nose-diving is the extremely speculative and sentiment-driven nature of the luxury residential segment in Mumbai.

Samantak Das, National Head of Research at Knight Frank India, said this is in sharp contrast to the commercial market where prices are determined by actual business activity.

He added that from 2010 to early 2011, this luxury market segment saw high volumes propelled by a bullish macro economy and positive signals given by the Indian government.

“The premium housing segment in Mumbai operates in extremes where buyers go into a buoyant investment spree during good times. Any signs of a downturn and they become conservative and go into a shell,” he said. The sector plummeted following downgrading of the economic forecast, inflation curbing measures introduced by RBI and the poor show in the share market.

The average value of prime property world-wide rose by 3 per cent in 2011 while in Asia it fell by 1 per cent. The report points out that this second phase of slump in the luxury residential market since late 2010, is markedly different from the price correction post the Lehman Brothers collapse in 2008.