After the pandemic, the real estate market in Mumbai has reached unprecedented heights both in quantity and pricing.
Bengaluru: A significant 17-acre site in central Mumbai, previously occupied by a textile mill, was sold for Rs 2,725 crore by DLF Ltd. to Lodha Developers Ltd. eleven years ago. Recently, a developer from Gurgaon, recognized as India’s largest listed realtor, revealed its plans to re-enter what is arguably the busiest real estate market in the nation.
In a partnership with Trident Group, a builder from the National Capital Region (NCR), DLF is embarking on a slum rehabilitation initiative within suburban Mumbai.
As DLF seeks to diversify its portfolio beyond Gurgaon, it aims to capitalize on the current housing boom. This decision comes in response to its earlier strategy, made in 2012, to withdraw from non-core markets and focus on its home territory amid a protracted slump in residential activity. Naturally, Mumbai emerges as the ideal destination for their renewed ambitions.
"It propels you to a different scale and price point because you are the financial capital. We finally took the risk after examining opportunities in recent years," stated Aakash Ohri, group executive director and chief business officer of DLF.
Similarly, Godrej Properties Ltd., which is also headquartered in Mumbai, is aligning its focus back to its home market after establishing a robust project portfolio in NCR. The company’s CEO, Gaurav Pandey, remarked, "We have conducted about seven transactions in Mumbai in the last two years and are optimistic about the market's good price and volume growth."
Following the pandemic, the Mumbai Metropolitan Region (MMR) achieved the highest sales percentages, driven by recovering housing market dynamics touching all-time highs. The surge in premium and luxury projects has significantly contributed to the sales boom in MMR. It's hardly surprising that established developers from the region and beyond are eager to tap into this lucrative market.
While the MMR market is notoriously challenging to penetrate—with higher costs compared to Bengaluru and NCR but greater profit margins—the market remains indispensable. Ohri noted the hurdles associated with obtaining project approvals and sourcing land but emphasized that these do not detract from MMR's allure.
Deliverer from B’lore
In the wake of repeated defaults by Infrastructure Financing and Leasing Service Ltd., which rattled the financial services sector in 2018, most lenders and institutional investors turned cautious towards Mumbai, opting instead for the more stable southern markets.
At that time, Mumbai developers faced the highest levels of leverage amid significant NBFC exposure within the city’s real estate sector. Post-pandemic, this landscape has transformed. The upheaval in MMR has created ample openings for both new entrants and seasoned developers following the exit of several players.
Take the Prestige Group, for instance. This Bengaluru-based developer has taken over struggling projects in Mumbai from banks, investors, and the National Company Law Tribunal.
With a remarkable Rs 2,700 crore in sales for Mumbai during 2022-2023, the company projects a 25-30% growth this year. "Sales velocity will follow if you choose the locations well and price it sensibly," noted Venkat Narayana, CEO of Prestige Group. "The demand is good."
Puravankara Ltd., another Bengaluru developer, initiated its first Mumbai project in 2021 and actively seeks mid-segment and premium properties for acquisition.
"Despite facing challenges before entering the Mumbai market, there are significant opportunities. The average price realization here ranges between Rs 15,000 and Rs 25,000 per square foot, as opposed to Rs 8,000–10,000 in others," stated Group CEO Abhishek Kapoor. "We're accustomed to growth, but the value and margins in Mumbai stand out, suggesting it'll play a vital role in our future expansions."
Many developers are currently looking to leverage the immense potential within the luxury sector.
The opulent peak
This year, the pricing of sea-view residences in Lodha Malabar, a project under construction on Walkeshwar Road in South Mumbai, set a remarkable benchmark of Rs 1.5 lakh per square foot.
Private buyers have invested between Rs 250 crore to Rs 350 crore in various apartments within this development. The leading developer in MMR, Macrotech Developers Ltd., which markets projects under the Lodha brand, reported substantial sales of Rs 12,064 crore in 2022-2023, with Rs 10,000 crore sourced from Mumbai alone. Approximately 40% of its revenue stems from homes priced above Rs 5 crore.
Prashant Bindal, chief sales officer of Macrotech, commented, "There exists strong demand for larger, luxurious homes, especially from families historically settled in their ancestral residences."
The premium and luxury segments have room for high-quality developers, as many existing players in MMR are unable to meet demand. Anuj Puri, chairman of the Anarock Group, remarked, "This market resembles a blend of two or three cities, encompassing discerning buyers willing to invest in premium projects."
Since 2018, Mumbai has consistently recorded luxury home sales amounting to roughly Rs 5,300 crore every six months, with figures doubling in the first half of 2023—homes priced at Rs 10 crore and above surged by about 50% to reach Rs 11,400 crore, as documented in a July report by Sotheby’s International Realty and CRE Matrix.
The ultra-luxury segment, characterized by pricing between Rs 40 crore and Rs 70 crore, has experienced even swifter expansion.
The momentum in the luxury home market is anticipated to continue its upward trajectory. Amit Bahgat, managing director (MD) and CEO of ASK Property Investment Advisors, asserted: "The resurgence of the financial services sector post-COVID has had a direct and significant impact on real estate purchases. Wealth creation will further propel the luxury market."
Competitors?
Among NCR and Bengaluru, MMR leads in sales and launches. Notably, the rise in unsold inventory is attributed to the uptick in launches outpacing sales, highlighted Pankaj Kapoor, MD of Liases Foras.
While other markets, particularly Gurgaon, are making strides, DLF has set a new benchmark with the sale of a 10,000-square-foot apartment in its Camellias project for Rs 100 crore—marking a record price point at Rs 1 lakh per square foot.
Therefore, DLF’s Ohri noted that Gurgaon could eventually pose serious competition to Mumbai.