The primary reason is the lack of supply. Mumbai city cannot expand because of its peculiar geography. It is surrounded by sea from three sides so you can only expand north to south. This makes land availability a massive issue in light of the growing population . Even on the northern side, there is the vast Sanjay Gandhi National Park which is a protected site and cannot be urbanised.

Another issue becomes the lack of connectivity. Infrastructure is poor and things like the Atal Setu, Coastal Road and the metro should have been built 20 years ago. It's not convenient to travel long distances for work. So, people wish to stay closer to offices. This again inflates the real estate prices, specially in South Mumbai where the offices are mostly concentrated. The local train is humid, overcrowded and outdated and not a viable option to cover large distances daily. This poor transportation infrastructure compounds the first problem aforementioned.

Another issue is the city being home to billionaires, celebrities and business magnets. The fact that you live anywhere close or in vicinity of any VIP drives real estate prices upwards. Living in such neighbourhoods becomes a matter of prestige and rodomontade.