Developers based outside Mumbai are making a beeline for India’s largest real estate market through redevelopment projects.
Photograph: Hitesh Harisinghani/Rediff
These include Delhi-based DLF, Bengaluru-based Prestige Estates and Puravankara, Pune-based Kolte-Patil Developers and Vascon Engineers, and Hyderabad-based Ramky Estates.
Mumbai’s policy-level incentives for redevelopment and less capital-intensive nature of the business amid a lack of open land parcels, are attracting developers.
They are using asset-light strategies to get better realisation from high property rates.
“For developers based outside the Mumbai Metropolitan Region (MMR), redevelopment offers an effective route to enter the market, given the limited availability of greenfield land.
“Additional attractive factors include higher floor space index (FSI) allowances in slum rehabilitation and society redevelopment projects.
“These translate into better returns,” said Siddharth Vasudevan, managing director (MD), Vascon Engineers.
Even players like Bengaluru-based Sobha and Ahmedabad-based Arvind Smartspaces are examining opportunities in Mumbai.
An executive of Credai-MCHI, a real estate forum in MMR, said, over 25,000 buildings across the region are eligible for redevelopment, with the total estimated project value exceeding Rs 30,000 crore.
According to realty firm Anarock, as of 2024, average property prices in MMR stood at Rs 16,600 per sq ft, while those in Bengaluru and Hyderabad were Rs 8,380 per sq ft and Rs 7,300 per sq ft.
The prices in the National Capital Region (NCR) stood at Rs 7,550 per sq ft.
Vijay Agrawal, MD, investment banking, Equirus, an investment advisory firm, said the average margins in real estate are around 25-30 per cent but the Mumbai market is known for higher realisation per square feet — between Rs 25,000 and Rs 1 lakh.
He said, “In other cities, general realisation is between Rs 5,000 and Rs 12,000, except in a few micro markets. Higher realisations help developers disclose higher revenue with a smaller sales area.
“This helps in improving their blended per sq ft realisations.”
In Mumbai, a developer can book revenue of Rs 500 crore for 100,000 sq ft with a sale price of Rs 50,000 per sq ft for one project.
However, in other markets, a developer will need to sell 500,000 sq ft of area at Rs 10,000 per sq ft to achieve the same revenue, he added.
“Listed companies can meet their top line growth targets by executing projects in this market,” Sanjay Daga, chief executive officer (CEO) and MD, Anex Advisory, a real estate consultant, said.
But this opportunity has its challenges.
Redevelopment for non-Mumbai developers involves multiple stakeholders.
Also, having a reliable team in a new market is necessary. Dealing with local tenants besides higher cost of approvals, are other issues to name a few.
“Developers fail to underwrite the working capital requirement in Mumbai projects.
“A typical project in other cities is between 5 and 15 acres, while Mumbai’s typical project is 0.5-3 acres.
“Construction costs in Mumbai are very steep,” said an industry expert.
DLF, for its first Mumbai project, has tied up with Trident Realty, a local firm.
Prestige, for its mega redevelopment project in Bandra, has joined hands with Mumbai-based Valor Estate and RC Group.
Despite strong balance sheets and deep expertise, building trust among buyers will take time.
“Local developers, due to their deep-rooted presence and familiarity with the intricacies, often have an edge,” said Shrinivas Rao, CEO, Vestian, a real estate consultancy firm.
