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Robust sales despite large supply in Mumbai

Top developers in Mumbai, Delhi and Bangalore, the three biggest property markets in India, have acquired thousands of acres of prime land in the recent past and are busy developing millions of sq ft of real estate.

Most of the developers and analysts that Khaleej Times spoke to dismiss speculation that the industry is in for tough times because of consumer resistance. Sales of apartments in Mumbai have slowed down in recent weeks – with estimates ranging from a 30 per cent to a 50 per cent fall – allegedly because of the high property prices.

Says Kailash Agarwal, a Dubai-based entrepreneur, who is promoting a $1 billion project in Currey Road in the heart of Mumbai’s textile district: “This is an annual and temporary phenomenon, when apartment sales slow down because of the monsoons. I expect sales to pick up from next month after the end of the rainy season.”

Agarwal argues that developers would not be willing to pay huge sums for land at auctions if the market had slowed down. State-owned National Textile Corporation (NTC), for instance, recently sold two plots of 8.3 acres and 2.3 acres at Worli for a whopping Rs15.05 billion and Rs4.74 billion respectively, which was more than double the reserve price in both cases.

Indiabulls Real Estate emerged the winner in the first two e-auctions of land conducted by the NTC. The price for the plots works out to a staggering Rs25,000 a sq ft for built-up space. On completion, it could be sold for as high as Rs50,000 a sq ft.

The NTC has sold more than half-a-dozen plots belonging to textile mills over the last five years and has raised about Rs25 billion.

Says Milind Korde, managing director, Godrej Properties Ltd: “Last year there were a lot of transactions happening and prices in Mumbai shot up by 40 per cent to 60 per cent. So if there is a slowdown now, it is normal.” Godrej Properties, which has a portfolio of over 80 million sq ft of properties under development in nearly a dozen cities across India, is bullish about growth in the real estate sector.

Another top Mumbai developer, Dharmesh Jain, chairman and managing director, Nirmal Lifestyle – which has a land bank of 3,500 acres in the Mumbai Metropolitan Region and Pune – says a majority of the buyers in Mumbai are genuine users and not investors. “That is why there is such good demand for apartments here,” he explains.

R. Karthik, chief marketing officer, Lodha – Mumbai’s top developer, which is putting up the world’s tallest residential building, World One, a 117-storeyed high-rise in Lower Parel in central Mumbai – claims that sales are robust, despite the explosive pace of construction activity in the metropolis. Last year, about 60 million sq ft of residential space was sold in Mumbai, which was a record, says Karthik.

In fact, of the 270 units that will be available at World One, 120 were sold within 20 days of the launch of the project, he adds. Each apartment is being sold for between Rs80 million and Rs160 million. “This has been one of the most successful product launches,” he says.

Navin Makhija, director, the Wadhwa Group – which is active in the commercial segment at the Bandra-Kurla complex and in luxury housing – says the company sold a million sq ft of property last year. This year, it has taken on hand two million sq ft of projects, and over the next six months, work will start on another two million sq ft of built-up space.

“Corrections will happen, but if a project meets the needs of the buyer in terms of location, quality, etc, demand will always be there,” says Makhija.

Real estate consultant Sunil Bajaj points out that developers who sell to actual buyers are not facing any problems, unlike those whose client base comprises investors. Off-take could be slow in projects where there are too many investors, he adds.

J.K. Bhosale, chief operating officer, City Corporation Ltd, Pune – which is developing Amanora Park Town, the first township project under the Maharashtra government’s special township policy – says prices in Pune are expected to go up during the festive season beginning October. “Demand is rising,” he notes.

Developers in Delhi and the National Capital Region (NCR) – which includes Gurgaon in Haryana and Noida in Uttar Pradesh – are also gung-ho about demand for apartments. “We sold about 4,750 units in our new projects in Noida since we launched it a few months ago,” explains Brijesh Bhanote, senior vice-president, sales and marketing, The 3C Company. “The apartments we sold last year for Rs2,820 a sq ft are now going for Rs3,700,” he adds.

Himanshu Pant, national head, sales and marketing, AIPL Ambuja Housing & Urban Infrastructure Ltd – which has taken up several projects across cities in Punjab – says demand is good across north India. “Many of the buyers have seen their values double within a year, reflecting the huge demand,” he adds.

Even in Bangalore, demand for residential apartments – including luxury ones – is good and developers report brisk sales. Snehal Mantri, director, Mantri Developers, says top-of-the-line properties are being picked up rapidly. The company promoted Mantri Altius, a premium project comprising 6,000 sq ft apartments in a building overlooking Cubbon Park.

Each apartment was sold for a whopping Rs200 million, the highest price for an apartment in south India. It is now promoting another luxury apartment complex, with apartments being sold for up to Rs100 million.

Indeed, developers point out that the remarkable pace of growth of several sectors of the Indian economy – including information technology, telecommunications, automobiles, healthcare and retail – has resulted in a huge demand for pricey apartments. Though there could be minor corrections at times, the long-term trend for such projects is positive.

nithin@khaleejtimes.com