MUMBAI REAL ESTATE – STILL GOING STRONG

Pawan Swamy, Managing Director ( West India ) Jones Lang LaSalle Meghraj

Mumbai is the financial capital of the country. While it is still a far cry from being comparable to Shanghai in terms of aesthetics and infrastructure, the fact remains that most large corporations and financial institutions have their presence in this city. The commercial demographics are large and variegated, and there is a constant inward migration from all over the country.

Mumbai, being the archetypal City of Opportunity , generates an unprecedented demand for properties across the residential, commercial and retail sectors. The realty market in Mumbai is therefore highly attractive. It attracts a huge amount of foreign investments, has a huge consumer market and boasts of a high quality workforce.

All these factors, coupled with growing urbanisation, are fuelling the demand for property constantly. Moreover, with limited space available in the central city, Mumbai’s real estate market boundaries are constantly extending into newer areas.

OUTLOOK FOR 2010-11

There will be lots of activity on the residential property front, owing to the strong demand and the fact that many developers are going for public funding. Residential is currently in vogue, so this is the area of focus for developers who seek to create brand in order to get on the funding bandwagon.

Residential prices are expected to move further upward as sales increase and investor sentiments strengthen. Demand for commercial spaces is improving and will continue to do so until the end of 2010. This will translate in to a large number of transactions, both in terms of leases and outright purchases. However, the new supply will keep pricing under pressure.

There is supply coming in on all segments of residential, from luxury to mass housing. The commercial and retail segments are also yielding enough supply to keep the market going over the next year.

HUDRLES AND LONG-TERM OUTLOOK

There is still a chronic infrastructure deficit that needs to be addressed. While we rely on the Government for filling the gap to a large extent, much also depends on developers, who need a more progressive view on the future directions the city’s urban spread must take. Nevertheless, there are infrastructure projects such as the metro, monorail and flyovers being put in place to boost accessibility more locations within the city and reduce commuting time. This is good news for the realty sector in the mid-to-long term, depending on the pace at which these measures are implemented. Residential real estate will continue to be in highest demand, and therefore on the priority list of most developers.

RESIDENTIAL INVESTMENT– RENTAL VS. OUTRIGHT OWNERSHIP:

Both demand typologies represent very dynamic sides of the same coin. Mumbai's residential market banks heavily on both.

Rental - Mumbai is a city with population of 20 million plus, and a major proportion of this population is constituted by a migrant workforce. Many of these will eventually return to their respective home states and cities. Moreover, a large segment of this migrant population cannot afford the property rates. Mumbai is expanding linearly towards the North. Since all major business activities are towards the South part of the city, where residential prices are generally unaffordable. These segments do not choose to settle down and buy property in the city, and this creates a huge demand-base for leasehold properties, since rentals in these parts of Mumbai are still affordable from the mid-management level onwards.

Nevertheless, rental affordability is still an issue for end users in the more centralized areas of Mumbai. By the same coin, the income on rental returns for property owners ranges from a mere 2.5%-3.5% annually, capital appreciation notwithstanding.

Outright ownership - Among the huge population base, there is always a component of people who seek to eventually own their own property. With more and more of the farther suburbs getting developed, there are always opportunities for this segment to enter the residential market at a relatively affordable level. They will benefit from the inevitable price rises as these areas develop in terms of connectivity and social / general infrastructure. Therefore, there is also a perennial demand for owned residential properties among those who can afford the capital outlay necessary to avail of the investment potential of Mumbai's high appreciation rates. Amenable home loan interest rates serve to keep this demand at a healthy level.

The problems related to outright ownership property in Mumbai are lack of general affordability, a high incidence of legal issues pertaining to clear titles, construction delays and lack of compliance to original development plans by builders.

MUMBAI REAL ESTATE - MAKE WAY FOR THE SUBURBS

Abhishek Kiran Gupta, Head – Real Estate Intelligence Services, Jones Lang LaSalle Meghraj

Internationally, suburban locations are formed and defined on the basis of road-travel time from the inner city. The concept of a parent city that spawns satellite cities is very distinct, with such satellite cities located anywhere between 25-50 kilometres from the parent city. Typically, such satellite cities are self–sufficient in almost all respects pertaining to lifestyle and social amenities.

This cannot be said for Indian suburbs, which must be seen in close context with their parent cities. Rather, Indian suburbs tend to be the results of peripheral and are extensions of the parent city that grow homogenously. The growth story being told by Indian suburbs is more about the absorption of demand that spills over from saturated and therefore often infrastructurally challenged central locations that are paradoxically overpriced.

In Mumbai’s real estate scenario, the suburban landscape has its stars as well as bit players that are gearing up for centre stage.

BANDRA (W)

Among the stars, Bandra (W) has always been considered an excellent location thanks to its high-end properties, sea link connectivity, good shopping and lifestyle embellishments such as restaurants and recreation facilities. It also boasts of a rather select array of schools and colleges.

Rates: Rs. 15000-45000/sq.ft.


KANDIVALI AND BORIVALI

Kandivali and Borivali are increasingly favored because of their budget properties and the fact that they have conveniences like shopping malls, educational and healthcare facilities and good train connectivity.

Rates:

Kandivali (W) – Rs. 4000-6000/sq.ft.

Kandivali (E) – Rs. 5500-7000/sq.ft.

Borivali (W) – Rs. 4000–6500/sq.ft.

Borivali (E) – Rs. 4000-6000/sq.ft.



MULUND AND VIKHROLI

Mulund and Vikhroli are also budget locations that are relatively less congested than areas of Mumbai. They have the advantages of good road and rail connectivity to the hinterlands and also town-side, as well as a suitable bouquet of shopping malls and hospitals.

Rates:

Mulund – Rs. 4500-7500/sq.ft.

Vikhroli – Rs. 5500-7500/sq.ft.


THANE

Thane ranks high on general infrastructure, affordability in terms of properties by reputed developers, and the fact that it is its own workplace catchment on many levels.

Rates: Rs. 3000-6000/sq.ft.

NAVI MUMBAI

Navi Mumbai is a planned city with good infrastructure and its own distinct culture and lifestyle. Property rates are favourable, and there is a good range to choose from.

Rates:

Vashi – Rs. 3500-5500/sq.ft.

Kopar Khairne – Rs. 3000-3500/sq.ft.

Airoli – Rs. 2500-3500/sq.ft.

Sanpada – Rs. 3000-4000/sq.ft.

Nerul – Rs. 3000-4000/sq.ft.

Kharghar – Rs. 2500-4000/sq.ft.

Kalamboli – Rs. 2000-2400/sq.ft.

Panvel - 2000-3000/sq.ft.



Mumbai’s suburban growth potential does not end with the currently established locations. The area beyond Panvel is developing rapidly, with a hallmark being Reliance’s Maha Mumbai mini city project. There are also many other developers in the fray, and this area is eventually bound to emerge as a suburb in its own right. Kalyan and Dombivili are increasingly becoming connected to the rest of Mumbai and will figure high on the radar before too long. Bhayander, Nalasopara and the Vasai-Virar region are also ramping up to become extended suburbs of Mumbai.

Rates:

Dombivali – Rs. 2500-3200/sq.ft.

Kalyan – Rs. 2500–3200/sq.ft.

Bhayandar – Rs. 2200–2800/sq.ft.

Vasai – Rs. 1500 – 2500/sq.ft.

Virar – Rs. 1800-2400/sq.ft.

MUMBAI REAL ESTATE - MAKE WAY FOR THE SUBURBS

Abhishek Kiran Gupta, Head – Real Estate Intelligence Services, Jones Lang LaSalle Meghraj

Internationally, suburban locations are formed and defined on the basis of road-travel time from the inner city. The concept of a parent city that spawns satellite cities is very distinct, with such satellite cities located anywhere between 25-50 kilometres from the parent city. Typically, such satellite cities are self–sufficient in almost all respects pertaining to lifestyle and social amenities.

This cannot be said for Indian suburbs, which must be seen in close context with their parent cities. Rather, Indian suburbs tend to be the results of peripheral and are extensions of the parent city that grow homogenously. The growth story being told by Indian suburbs is more about the absorption of demand that spills over from saturated and therefore often infrastructurally challenged central locations that are paradoxically overpriced.

In Mumbai’s real estate scenario, the suburban landscape has its stars as well as bit players that are gearing up for centre stage.

BANDRA (W)

Among the stars, Bandra (W) has always been considered an excellent location thanks to its high-end properties, sea link connectivity, good shopping and lifestyle embellishments such as restaurants and recreation facilities. It also boasts of a rather select array of schools and colleges.

Rates: Rs. 15000-45000/sq.ft.

KANDIVALI AND BORIVALI

Kandivali and Borivali are increasingly favored because of their budget properties and the fact that they have conveniences like shopping malls, educational and healthcare facilities and good train connectivity.

Rates:

Kandivali (W) – Rs. 4000-6000/sq.ft.

Kandivali (E) – Rs. 5500-7000/sq.ft.

Borivali (W) – Rs. 4000–6500/sq.ft.

Borivali (E) – Rs. 4000-6000/sq.ft.

MULUND AND VIKHROLI

Mulund and Vikhroli are also budget locations that are relatively less congested than areas of Mumbai. They have the advantages of good road and rail connectivity to the hinterlands and also town-side, as well as a suitable bouquet of shopping malls and hospitals.

Rates:

Mulund – Rs. 4500-7500/sq.ft.

Vikhroli – Rs. 5500-7500/sq.ft.

THANE

Thane ranks high on general infrastructure, affordability in terms of properties by reputed developers, and the fact that it is its own workplace catchment on many levels.

Rates: Rs. 3000-6000/sq.ft.

NAVI MUMBAI

Navi Mumbai is a planned city with good infrastructure and its own distinct culture and lifestyle. Property rates are favourable, and there is a good range to choose from.

Rates:

Vashi – Rs. 3500-5500/sq.ft.

Kopar Khairne – Rs. 3000-3500/sq.ft.

Airoli – Rs. 2500-3500/sq.ft.

Sanpada – Rs. 3000-4000/sq.ft.

Nerul – Rs. 3000-4000/sq.ft.

Kharghar – Rs. 2500-4000/sq.ft.

Kalamboli – Rs. 2000-2400/sq.ft.

Panvel - 2000-3000/sq.ft.

Mumbai’s suburban growth potential does not end with the currently established locations. The area beyond Panvel is developing rapidly, with a hallmark being Reliance’s Maha Mumbai mini city project. There are also many other developers in the fray, and this area is eventually bound to emerge as a suburb in its own right. Kalyan and Dombivili are increasingly becoming connected to the rest of Mumbai and will figure high on the radar before too long. Bhayander, Nalasopara and the Vasai-Virar region are also ramping up to become extended suburbs of Mumbai.

Rates:

Dombivali – Rs. 2500-3200/sq.ft.

Kalyan – Rs. 2500–3200/sq.ft.

Bhayandar – Rs. 2200–2800/sq.ft.

Vasai – Rs. 1500 – 2500/sq.ft.

Virar – Rs. 1800-2400/sq.ft.

Destination of the Future for Mumbai Realty

With Booming commercial property development on LBS Marg and Neighboring locations like Ghatkopar, Vidyavihar, Powai / Connectivity to all suburbs, BKC, Eastern Express Highway, LBS MARG is becoming an hot destination for commercial property development. Since LBS Marg is centrally located and connected to all suburbs, it is becoming a more preferable destination for most of the corporates. It has got connectivity to major destinations like Bandra Kurla Complex, CST Road, Kalina, Eastern Express Highway, Jogeshwari Vikroli Link Road which helps people to drive down from Eastern Suburbs to Western suburbs, Powai - Sakivihar road which connects to Andheri and from Eastern Express Highway people can easily drive down to Airoli, Vashi, Ghatkopar, Chembur, Sion and towards town. Also, the first proposed METRO RAIL coming up from Versova-Ghatkopar Belt is one of the reasons for the major development. All the railway stations like Ghatkopar, Vikroli, Kanjurmarg, Bhandup, Mulund are at a walking distance near to LBS MARG.

• Demands from corporate sector mainly from IT, ITES, BPO’s / demand - supply position in the commercial property :-- Considering all the above factors, sectors like IT/ITES/BPO’s / FINANCE and BANKING/RESEARCH firms and even premium hotel players are eyeing the LBS Marg belt from Ghatkopar To Thane. Already players like WNS, Accenure, CapGemini, Wipro Spectramind, Prudential, Colgate Palmolive, HCC, CIPLA, Johnson and Johnson are located in this area and demand is still coming up for office space requirements from corporates. However, one of the major factor which attracts the demand at LBS Marg are the rates that are quite lower compared to Bandra Kurla Complex, where the lease rates are approximately Rs.300-400 per sq. ft. Those who are not able to match their requirement considering the availability of supply and rate factor at BKC, they switch over to LBS MARG where the rates are in the range of Rs. 60 to Rs.180 per sq. ft, which is still at the lower side compared to Bandra Kurla Complex. Currently there is a demand of more than 20 lakh sq. ft for office premises ranging from 5000 sq. ft till 2,00, 000 sq. ft each. However, there is a scarcity of commercial office premises for ready possession. Most of the constructions coming up are under construction phase. Total construction of around 60 lakh sq. ft is coming up at LBS MARG and connected to areas like Powai, Ghatkopar (East), Ghatkopar (West), Vidyavihar, Chembur.
  
• Projects coming up from well known developers:-- Considering the demands coming from all above players, most of the developers are coming up with development of commercial office space with state of the art amenities and malls on LBS MARG belt. Developers Like Runwal, K Raheja Construction, Hiranandani, Kohinoor Group, Nirmal and other private developers from Ghatkopar are coming up with large floor plates of commercial office premises / IT PARK / Malls to meet demand for these corporates.

Following are few of the projects coming up :

• Rates / Appreciation of property values in last 2 years and future prospect:- Rates in these location are ranging from Rs. 7500 per sq. ft to Rs. 18000 per sq. ft (Capital Value) and for lease it ranges from Rs.60 per sq. ft till Rs. 180 per sq. ft. There has been an appreciation in the capital value of property in last 2 years by more than 100%. Rates in same areas were around Rs. 4000 per sq. ft two years back. Analyzing the current growth scenario and demands coming up, prices are expected to rise further; we can see more and more companies having their corporate offices in LBS MARG and connected areas like Powai, Ghatkopar, Vidyavihar, Chembur.

Contributed By : Mehul Ved