Here’s why real estate developers are making a beeline for the Mumbai market

For Representational purpose only

Many of these developers are seizing opportunities that exist in the redevelopment projects segment by entering mid-way to fill in the gap as an executor of these projects.

Several real estate developers from Bengaluru, Pune and Ahmedabad have entered the Mumbai market over the last few years. DLF announced last week that it would re-enter the Mumbai Metropolitan Region with Trident Buildtech, which is developing a slum rehabilitation project in Andheri West. Real estate experts say that it’s primarily the margins, high sales and redevelopment opportunities that make India’s financial capital an attractive market for realtors.

A few days back, real estate major DLF  announced its re-entry into the Mumbai property market and said that it intends to launch close to nine lakh square feet (sq ft) of space in Andheri West by the end of this fiscal year along with its partner Trident Group, as part of the first phase of a project in the metropolis. DLF will pump in close to Rs 400 crore as equity to develop the entire project, which has a potential saleable area of 30 to 35 lakh sq ft, the company had said in an investor call on July 24.

“We will be developing the first phase of free sale area totalling approximately 9 lakh sq ft of the saleable area. This will be a pilot project to understand the market dynamics and apply these learnings to see how best we can apply our expansion strategy in this market,” the company said.

DLF will hold a 51 per cent stake in the special purpose vehicle (SPV) that will develop the project. Trident Group will hold the remaining 49 per cent, DLF CEO Ashok Tyagi told analysts. “We reflected for a long time before re-entering the Mumbai real estate market…We are investing Rs 400 crore as equity for the entire project, which has a potential saleable area of 3-3.5 million square feet,” he had said.

DLF had said that Pegeen Builders & Developers Private Limited (Pegeen) agreed to enter a development agreement with Sahyog Homes to develop the first phase of the Slum Rehabilitation Project in Andheri (W). In 2012, DLF sold 17 acres of prime land in Mumbai to Lodha Developers (now renamed as Macrotech Developers) for about Rs 2,700 crore. DLF had bought the land from National Textile Corporation for Rs 703 crore in 2005.

Bengaluru developers

Real estate developer Puravankara has all along said that it was looking at expanding its presence in the western markets by focusing on more projects in Mumbai.

“Mumbai has always held significant interest for us as a prominent player in the real estate industry. Currently, we have two residential projects in the city — Purva Clermont in Chembur and Provident Palmvista in Shilphata, Kalyan,” said Abhishek Kapoor, Group CEO and director, Puravankara Ltd.

“The positive customer response we received serves as a resounding validation of our unwavering commitment to excellence and the quality of our offerings. As construction is in full swing for both projects, we are poised to announce new launches in the coming years that will enrich our portfolio and further strengthen our brand’s presence in Mumbai.”

“Our approach towards Mumbai is a blend of strategic planning and versatility, encompassing redevelopment, society redevelopment, and brownfield projects. We envision a manifold increase in revenue streams from Mumbai over the next few years,” he told Moneycontrol.

Prestige Gruop, a Bengaluru-based developer,  has invested approximately Rs 6,000 crore in Mumbai and launched close to Rs 2.3 million sq ft.

While some projects are for redevelopment or are projects acquired via the NCLT, the vast majority have been on freehold or leasehold land parcels. “If the right opportunity comes by, the company takes it up, irrespective of the nature of the development,”  Tariq Ahmed, CEO, West India, Prestige Group, told Moneycontrol. He added that the launches expected this fiscal year include Prestige Ocean Towers, in Marine Lines, and Prestige Nautilus, Worli.

Asked why the company decided to venture into Mumbai, he said that the chief reason was because the city is the  financial capital of the country. “The consumption of real estate as well as the prices prevalent here are among the highest in the country. Hence it is a very attractive market for real estate developers,” Ahmed explained.

Earlier this year, Pune-based listed real estate developer Kolte-Patil Developers Ltd announced the launch of two redevelopment projects in Mumbai with the aim of strengthening its residential portfolio in the financial capital. The two launches in the western suburbs of Mumbai, named K52 in Khar and Alora in Kalina, Santacruz, have a revenue potential of Rs 110 crore and Rs 300 crore, the company had said.

Ahmedabad-based realty developer Savvy Group has also entered the Mumbai market this year.

“Major real estate developers that have a good track record in their own markets are making their presence felt in Mumbai on account of better margins and high sales velocity,” said Ritesh Mehta, Senior Director and Head, West and North, Residential Services & Developer Initiatives, JLL.

Many of these developers are seizing opportunities that exist in the redevelopment projects segment by entering mid-way to fill in the gap as an executor of these projects.  “Both their leveraging and execution capacity is high due to which they get easy access to bank funding at reasonable rates. Besides, they are utilising the opportunity to diversify and expand to other markets,” he said.

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