Why everyone wants a slice of Mumbai realty

  • The housing market in Mumbai has hit new highs post the pandemic, both in terms of scale and price

Madhurima Nandy
Updated23 Oct 2023, 05:09 PM IST
DLF is teaming up with Trident Group, a National Capital Region (NCR)-based builder, to develop a slum rehabilitation project in suburban Mumbai.
DLF is teaming up with Trident Group, a National Capital Region (NCR)-based builder, to develop a slum rehabilitation project in suburban Mumbai.

Bengaluru: Eleven years ago, DLF Ltd sold a 17-acre property in central Mumbai that once housed a textile mill to Lodha Developers Ltd for 2,725 crore. This year, the Gurugram-based developer, India’s biggest listed realtor, said it was reentering the country’s most vibrant real estate market.

DLF is teaming up with Trident Group, a National Capital Region (NCR)-based builder, to develop a slum rehabilitation project in suburban Mumbai.

If DLF’s 2012 decision was to exit non-core markets to focus on its home turf at the start of a multi-year residential slowdown, it wants to diversify beyond Gurugram now amid a housing boom. It’s a no-brainer that its first stop would be Mumbai.

“Being the financial capital, it catapults you to a different scale and price point. We have been looking at opportunities in recent years, and finally took the plunge,” said Aakash Ohri, group executive director and chief business officer at DLF.

Mumbai realty data

Similarly, there is Mumbai-based Godrej Properties Ltd. The company, after building a formidable project portfolio in NCR, is now focusing on its home market again. “In the last two years, we have done around seven transactions in Mumbai and we are optimistic because the market has seen good price and volume growth,” Gaurav Pandey, chief executive officer (CEO) at the company, said.

The housing market has turned around and hit new highs post the pandemic, and the Mumbai Metropolitan Region (MMR) grabbed the largest share of sales. A significant contributor to MMR sales has been premium and luxury projects. Not surprisingly, established developers, from both within and outside MMR, are interested in grabbing a piece of the action.

To be sure, MMR is a tough market to crack. The profit margins are better, but the costs too are higher than in NCR and Bengaluru. Project approvals can be tricky, and sourcing land a challenge.Yet, like Ohri hinted, it is a market one cannot ignore.

Saviour from B’lore

After serial defaults by Infrastructure Financing and Leasing Services Ltd, a non-banking financial company (NBFC), in 2018 sent shock waves through the financial services sector, most lenders and institutional investors turned wary of investing in Mumbai, focusing instead on more stable markets in south India.

Mumbai developers were highly leveraged and the total exposure of NBFCs to realty in the city was the highest. That changed after the pandemic. The distress in MMR that caused many developers to go belly-up provided opportunities for new but established developers.

Take the Prestige Group. The Bengaluru-based developer has taken over distressed projects in Mumbai from developers, banks, investors and via the National Company Law Tribunal.

It clocked 2,700 crore of sales in 2022-23 in Mumbai, and is targeting 25-30% higher sales this year. “The demand is good, and if you choose the locations well and price it sensibly, sales velocity will follow,” said Prestige Group CEO Venkat Narayana.

Another Bengaluru developer, Puravankara Ltd, which launched its first Mumbai project in 2021, is looking at both mid-segment and premium acquisition opportunities.

Group CEO Abhishek Kapoor said the entry barrier is tough in Mumbai, but once you crack it, the opportunity is rewarding. If the average price realization in other markets is 8,000-10,000 per sq. ft, in Mumbai, it is at least 15,000-25,000 per sq. ft.

“We are used to large volumes of construction, but Mumbai adds margins and value, and will be an integral part and a larger contributor in our future growth,” Kapoor said.

Right now, many developers simply want to capture the value the luxury segment offers.

The luxury high

Lodha Malabar, an under-construction project with sea-view homes in south Mumbai’s Walkeshwar Road, created a benchmark of sorts this year with prices touching 1.5 lakh per sq. ft. Individual buyers bought multiple apartments for 250-350 crore. Macrotech Developers Ltd, which sells projects under the Lodha brand, is MMR’s largest developer. The company clocked 12,064 crore of sales in 2022-23, of which 10,000 crore was from Mumbai alone. Homes worth 5 crore and above contribute about 40% of its business.

“The demand for larger, luxury homes is robust, especially for families who have always lived in their ancestral homes,” said the company’s chief sales officer Prashant Bindal.

“There is huge space for good quality developers in the premium and luxury segments, because there aren’t that many players in MMR to cater to the full demand. It is like a combination of two-three cities within it, and there are discerning buyers who are willing to pay for premium projects,” Anuj Puri, chairman of property advisory Anarock Group, said.

Since 2018, Mumbai city has recorded about 5,300 crore of luxury home sales every half year. In the first half of 2023, that doubled, as sales of homes costing 10 crore and above rose nearly 50% to 11,400 crore, according to a July report by Sotheby’s International Realty and CRE Matrix.

The ultra-luxury segment—a price tag of 40 crore to 70 crore—grew even faster.

Developers and analysts believe the sales momentum of high-end homes will continue. “The way the financial services industry has gained post-covid has had a direct impact on property buying. When wealth creation happens, the luxury segment will grow,” said Amit Bhagat, CEO and managing director (MD) of ASK Property Investment Advisors.

Any rival?

With the highest sales and launches, MMR is far ahead of NCR and Bengaluru. The positive is that the demand in MMR is genuine, given the density of population. Unsold inventory has increased, but that’s because the rise in launches has surpassed sales, said Pankaj Kapoor, MD of Liases Foras.

Sure, other markets, particularly Gurugram, are catching up. DLF recently sold a 10,000 sq. ft apartment in its Camellias project on Golf Course Road for 100 crore, at 1 lakh per sq. ft, creating a new price benchmark.

Gurugram, therefore, could give Mumbai a run for its money, going ahead, DLF’s Ohri said.

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First Published:23 Oct 2023, 05:09 PM IST
HomeIndustryWhy everyone wants a slice of Mumbai realty

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