by THO
A few days ago, Boman Irani, CMD of Mumbai-based Rustomjee Group, also known as Keystone Realtors, had stated that he does not lose sleep over new real estate developers from other cities wanting to enter the redevelopment space in the financial capital. He rather looks at it as an advantage because “they bring with them a healthy competitive spirit.”
“I don’t lose sleep over this as many developers are wanting to enter this space. The size of the redevelopment market of old buildings in Mumbai is so huge that there is no dearth of opportunities. New players will add value to redevelopment space in Mumbai.” he had recently said at an investors’ call.
“I look at it as an advantage because they bring with them a healthy competitive spirit. And quite honestly, it is better to have well capitalized, large developers enter the same space so that there is no knee-jerk reaction,” he had said.
In the past decade, at least half a dozen real estate developers from Bengaluru have expanded their presence in Mumbai. Several firms such as Bengaluru-based Prestige Group and Puravankara have either entered or announced their foray into the Mumbai real estate market.
But why do developers want a share of the Mumbai real estate market? This is primarily to expand and consolidate their presence across cities, said real estate experts.
The expansion pattern is more evident with listed real estate developers rather than that of unlisted or mid-sized realtors in these cities, experts said.
Better margins and high sales velocity draw developers to Mumbai
Bengaluru-based Puravankara Limited entered the Pune market in 2017 and the Mumbai market in 2021. The company has been in expansion mode in both Mumbai and Pune for a couple of years. The company also aspires to have a sizable portfolio in the commercial segment of Mumbai and Pune markets.
“The Mumbai real estate market is a natural choice when it comes to expansion because of several reasons. The first reason is that the Mumbai Metropolitan Region (MMR) is the largest market in the country and is almost equal in size when compared to the entire South India real estate market. Secondly, MMR offers products across price segments that range from ultra luxury to affordable housing thus enabling a wide product range,” said Rajat Rastogi, CEO – West and Commercial Assets, Puravankara Limited.
“Today as we speak, Puravankara in Mumbai and Pune’s residential real estate market has around 4.5 million sq ft under development and this includes multiple projects in Mumbai and Pune. We have plans for launching six to seven projects in Mumbai and Pune in the next one year. We are also having plans on developing a sizable commercial real estate portfolio for Mumbai and Pune. So, we are not just having a footprint but also expanding deep in Mumbai and Pune,” said Rastogi.
Another Bengaluru-based developer Prestige Group as of FY24 has 37 ongoing projects. Of these seven projects are in Mumbai, 20 in Bengaluru and the remaining in cities like Hyderabad, Calicut, Mangaluru, Kochi, Ooty, according to the company’s investors’ presentation for FY24.
The company has a pipeline of 30 projects of which three are in Mumbai and 17 in Bengaluru.
Also Read: Prestige Group planning mid- segment housing projects in Thane, Panvel near Mumbai
A Mumbai-based developer not wishing to be named told HT.com that he launched a project in Pune despite having a healthy portfolio in Mumbai. “What I can earn by constructing one sq ft in Mumbai, I will have to construct 20 sq ft in Pune. It, therefore, makes sense for listed players to enter the Mumbai market. Mid and small-sized developers should continue to work in their home turf Mumbai,” he said, adding being the financial capital, it puts you on a different scale and price point as there is demand for luxury housing.
A lucrative business proposition
According to Ritesh Mehta, senior director and head – West, East and North India, Residential Services | Developer Initiatives, the redevelopment opportunity opened up in marquee locations such as Juhu, Bandra, Malabar Hill a few years back and is a lucrative proposition for developers from other cities. It is a high margin but low volumes business.
Developers from the South are interested in the high margins. The minimum price for these projects starts at around ₹25,000 per sq ft in Mumbai as opposed to perhaps ₹7,000 to ₹10,000 per sq ft back home and therefore it is more lucrative for these developers to launch projects in the financial capital. A few developers from South India launched projects at ₹35,000 per sq ft a few years ago and are now looking at launching new projects at around ₹70,000 per sq ft.
“They started with mass housing in the periphery and are now launching luxury projects in the heart of the city,” he said, adding it’s not an easy task to launch projects in Mumbai.
“It takes time to get approvals, convincing old tenants in a project is not an easy task. And yet, despite these challenges, viability and returns are higher in Mumbai and that’s what’s driving them to stay on,” he added.
