Bengaluru: Seven years is a long time and it feels even longer if bureaucratic tinkering of rules, like in the case of Rohan Lifescapes, results in several missed opportunities.
Final approvals for realty firm Rohan Lifescapes’ residential project in south Mumbai’s Hughes Road, where property prices are about Rs.50,000 per sq. ft, have come in seven years after it first moved an application because of frequent changes in the building norms in India’s financial capital.
Meanwhile, the property market in Mumbai lost much of its sheen and Rohan Lifespaces ceded an opportunity to partner with Trump Organization USA Llc to build a Trump Tower on the site, an agreement the two companies had signed in 2011. Trump eventually partnered with Lodha Group to build the Trump Tower in Mumbai.
Notwithstanding the harsh reality of Mumbai’s property market, particularly in the luxury segment where oversupply and weak demand are driving prices down, Haresh Mehta, chairman of Rohan Lifescapes, is now preparing to get the project off the ground on his own.
The project is now a truncated version of the original grand vision. Only 160,000 sq. ft can be built now compared with 350,000 sq. ft planned earlier owing to a change in floor space index norms.
And frustratingly for developers, Mumbai has switched from being a seller’s to a buyer’s market.
“Sales in south Mumbai are happening only if one gives a good discount, but we want to hold on and sell only as much as the cash flows we need to keep constructing the project, until there is an improvement in sentiment,” said Mehta. “We will begin construction and start the sales process, though we are not planning a formal launch as such.”
The supply situation in the luxury segment is only likely to worsen. A string of some of the most-awaited projects in Mumbai, including prime mill land, large slum redevelopment pockets and luxury homes in the toniest neighbourhoods, that were stuck for years because of policy paralysis and a challenging real estate scenario, are set to start construction and sales.
“Developers in Mumbai always wanted to buy land and since they mostly didn’t get financing to buy land, they stretched themselves too thin,” said Mudassir Zaidi, national director, residential agency, Knight Frank India, a real estate consultancy.
In a city known for its steep property and land prices, this became a huge liability, when real estate firms, after having invested heavily, couldn’t launch its projects due to a freeze on approvals when development control regulations were amended or coastal regulations were altered.
It wasn’t just delays in approval. With numerous policy changes effected by successive governments, many developers, who bought these expensive land back in the pre-2008 days, had to stop work as they faced a cash crunch. They later entered into alliances with other firms, which are now steering these projects towards launch.
For instance, Wadhwa Group is now set to build luxury sea-facing residences on a piece of land at the defunct Hindoostan Spinning and Weaving Mills in Mumbai’s Prabhadevi. Hubtown Ltd and DLF Ltd had initially bought this land from the Thackersey family for Rs.350 crore in 2007, just before the global financial crisis began.
The slowdown after that saw DLF exiting the project and Hubtown entangled not only in the complex coastal regulation zone (CRZ) and other approvals but also a liquidity crunch.
Wadhwa has now entered as a joint venture partner to breathe life into the project.
“We are expecting the commencement certificate in a fortnight, after which we will start construction. We are known for our design and quality of construction, so it won’t be tough for us to sell a project like this,” said chairman Vijay Wadhwa.
High-end homes may not find many takers today, but some developers are banking on the unique project locations and profile as they revive and launch them. The losses due to delays have been enormous; a few have been unable to absorb them.
Last week, DB Realty Ltd said it got approvals to start the five-acre MIG (middle-income group) housing colony project in Bandra East that was delayed by approvals by nearly five years. The firm has struggled to get its robust pipeline of projects on track and has recently tied up with various joint venture partners for three of its projects to cut costs and speed up works.
“The company is pooling the strength of the partner with our strength of great land parcels at good locations,” said a person familiar with the development, but didn’t wish to be named.
“Developers have run out of options. They are sitting on land but can’t construct the project themselves,” said Sanjay Dutt, executive managing director, south Asia, at property advisory Cushman and Wakefield.
Chhabria is planning to sell apartments in MIG for Rs.3-4 crore and is going to build smaller houses for Rs.8-10 crore project on Hughes Road on a plot of land that was earlier to be developed by Hubtown.
Omkar Realtors and Developers Pvt. Ltd has undertaken the famous Dhobi Ghat redevelopment project on seven acres of prime land in Mahalaxmi that houses an open-air laundry and about 7,000 slumdwellers, almost a decade after an agreement was signed between another developer and the Slum Redevelopment Authority.
After obtaining the majority consent of slumdwellers, Omkar Realtors now plans to launch the project early next year, said Omkar director Gaurav Gupta.
Approval was obtained a few months ago to redevelop a beautiful bungalow property in south Mumbai’s Carmichael Road, bought in 2010 by Peninsula Land Ltd and developer Khemchand Kothari.
“Construction has started but buyers of luxury homes are more cautious and smart now, and want to get good value from a deal. This kind of delay has caused huge losses and a pile-up in interest costs, and now when the market is down, it is not easy to sell as well," said a person familiar with the development said on condition of anonymity.