Super Luxury Residential Development in Mumbai – Update 2011
Mumbai luxury real estate is one of the most expensive in the world and also one of the fastest in terms of price growth. While luxury property prices remained stagnant in most parts of the world, prices in Mumbai increased by more than 20% in 2010.
According to Knight Frank and Citi Bank’s Global Wealth Report, Asian cities such as Shanghai and Mumbai will begin to close the gap in the next 10 years with New York and London currently at the top of the wealth report’s global cities index. . Mumbai was also ranked as the 25th most expensive city in the world in terms of property prices, while Monaco remains the most expensive city in the world, followed by London.
And this trend will only continue with the aggressive real estate appetite shown by Indian HNIs. According to the report, Indian HNIs would like to invest at least 10% of their total portfolio in residential real estate. This was double what financial advisers would have done. However, real estate, as an asset class, has rarely disappointed in a city like Mumbai, where stories of five baggers in five years are not uncommon. The luxury apartment in a city like Mumbai can cost anywhere from $1 million to $12 million, and range from 5,000 square feet to 13,000 square feet in size. The luxury real estate euphoria is fueled by optimism in some real estate pockets in South Mumbai, where luxury apartments have become 25% to 30% more expensive than a year ago.
However, it has been a mixed bag in 2011, where the glut of apartments in central Mumbai may play a bad sport and one may see some correction in prices. According to broker estimates, about 40% of the luxury apartments being built in Mumbai have not been sold. Buyers in markets like central Mumbai are not buying at high rates of INR 25,000 per square foot. And as a result, pre-sales (where residential apartments are typically sold before they’re fully built) have shrunk. This has resulted in construction delays as Indian developers want to ensure they don’t have a large number of unsold units in their ready buildings.
Mumbai Luxury Residential Micro Market – South Mumbai
Mumbai basically has two luxury micro-markets: South Mumbai and Central Mumbai. The South Mumbai market consisting of areas like Malabar Hill, Cumbala Hill, Napean Sea Road, etc. it is an evergreen market with a severe land shortage and an insatiable appetite for luxury developments. Price points of INR 50,000 per square foot are quite common in this market, severe land shortages and an insatiable appetite for luxury development. Buyers are typically Indian HNI businessmen (upgrading old builds to fully loaded and feature-rich new towers), NRIs, and wealthy professionals. They typically take out very small bank loans (often for tax efficiency) and are not affected by consolidation of interest rates etc.
Trump Tower, Hughes Street: Donald Trump plans to bring his signature luxury homes to Mumbai on Hughes Road in South Mumbai. The Trump Towers are being developed in conjunction with Mumbai-based developer Rohan Lifescapes. The 60-story Tower will have 5,000-square-foot apartments overlooking the Arabian Sea. The tower will have around 45 apartments and lifestyle amenities will include a luxury spa, fitness center and mini theater. It will be interesting to see if the design or development will have something unique or if it will just be a case of Trump charging a hefty royalty fee for his brand. According to market sources, given the small number of flats and the newness associated with the Trump brand, the development may command a 20-25% premium compared to neighborhood developments in South Mumbai.
Mukesh Ambani’s billion dollar house: South Mumbai is also privileged to be home to the richest man in India, Mr. Mukesh Ambani, who is shaping up to be the richest man in the world in a few short years. Mr. Ambani has built the most expensive house in the world in Mumbai, estimated at over a billion dollars. The house named Antilia, after a mythical island, resembles a condominium tower or a set of Lego building blocks from the outside. But inside it is grand and consists of around 37,000 square meters of space, more than the Palace of Versailles. Rising more than 550 feet, the billion-dollar tower has three helipads, a gym, a dance studio, a fifty-seat movie theater, and underground parking for more than a hundred and fifty cars. The house is rumored to have a staff of 600 waiters.
Mumbai Luxury Residential Micromarket: Central Mumbai
Downtown Mumbai’s luxury market, consisting of Lower Parel, Mahalaxmi, Worli and Elphinstone, is facing a luxury development glut with 10 million square feet of high-end residential space on offer in 2-3 years . It is difficult to go a kilometer through this area and not see a new construction enter. This belt is set to see 7-8,000 houses in 2-3 years. With projects quoting between Rs 18,000 and Rs 26,000 per square foot, it is difficult to see how this supply will be absorbed at these rates.
There are two developer segments here. A set of developers, say Class A, have low inventory and/or are in a JV with the land owner (who acquired the land at a nominal rate years ago) willing to hold out until the market picks up. The other group of developers, let’s say Class B, are willing to negotiate as they have a large inventory on the way and have bought land at reasonably higher prices. As a consequence, the price quoted by two neighboring projects could have a notable variation.
The Class A developer prefers to slow down the project instead of reducing prices. The cost of land for these developers is low and the sale price of the apartment can be 5 to 10 times the cost of the land. These developers bought land in cotton and textile factories at INR 3,000-5,000 per square foot about a decade ago. They recover the cost of the land by selling a small percentage of the apartments. Thereafter, they can afford to wait to sell most of the inventory at high prices. Obviously, this will cause many delays in the construction of these projects.
Class B developers who have a large inventory of properties are feeling the pinch due to high interest rates (which also affect buyers) and cautious financing from banks. These developers will be the first to cut prices and a price cut of 10% to 15% may be in order. Price correction can also be disguised by offering freebies such as free parking and a stamp duty exemption.
However, downtown Mumbai is also witness to some exciting super-luxury developments, some of which are Lodha’s World One and Indiabull’s Sky developments.
The World One of Lodha: Lodha’s 450-metre, 117-story World One tower is scheduled to be built in 2014 at the former Srinivas Mills in Lower Parel. World One is projected to be taller than the Empire State Building in New York and is set to break the record for the tallest residential tower currently held by the 323-meter residential complex in Australia called “Q1.
World One will be a super-luxury development consisting of approximately 300 units that will incorporate principles of sustainable and ecological living through the recycling of its water, the harvesting of rainwater and the use of solar energy. The building caters to an Indian HNI who prefers a lot of outdoor space in apartments as opposed to inside apartments in New York, Hong Kong, or London. Indian families don’t want to be cooped up and need access to outside air, so every apartment has a balcony. The foreigner or an expat in India will loathe it because of the pollution and dust.
The height and unique curved shape of the building will allow for a 360-degree panoramic view of the city, including the Bandra Worli Sea Link, the racecourse and the Arabian Sea. The height will also reduce noise, pollution and heat. The floors of the upper floors will have a temperature 4.5 degrees Celsius lower than that of the ground floor. Lodha has previously sold some of these flats to its former clients at a 30% premium for neighborhood development at INR 25,000 per square foot.
Indiabulls Sky Project: The Indiabulls Sky project, a high-end offering from Indiabulls Real Estate, is expected to be delivered in 2013. The Sky project is made up of three towers: Sky, Sky Suite and Sky Forest. The project has the option of presidential villa, duplex and penthouse apartments. Living spaces target the rich to super-rich with spaces from 2,600 square feet to 13,500 square feet.
In addition to the luxurious spa and massage room, the building has its own personal housekeepers and butlers. It boasts of spacious reading rooms, a home theater, a cigar room, a wine cellar, and an American deli. To meet the needs of a global Indian jet, the development has an ultra-modern business center and services such as concierge service for travel reservations, limousine rentals or currency exchange at the airport.
Adding to all of the above, an internal convenience store with a pharmacy and a 24-hour coffee shop, the project promises to provide a dazzling lifestyle.
Bombay Residential Luxury Pop-Up Micro-Market – Western Suburbs
It is estimated that by 2020, people earning more than Rs 20 lakhs will increase from 4 to 10 percent of Mumbai’s population, translating to approximately six hundred thousand families. There will be a need for luxury housing for these families in the western suburbs.
The Western Suburbs are a hub of commercial activity with the Bandra-Kurla complex and Andheri Kurla Road emerging as thriving commercial centres. This is fueling a huge demand for luxury homes in the immediate vicinity of these centers. The rise of luxury housing in the suburbs is supported by increased land availability and a high FSI (twice that of South Mumbai).
The luxury residential in Western Suburbs is being led by two developers: the Lodha group and the Oberoi group. These developers have developed differentiated projects in the suburbs backed by good sales and marketing programs.
These developers burst onto the scene when they acquired real estate that is not easy to come by in Mumbai. Oberoi obtained 80 acres of land that had been the research center of the Hindustan pharmaceutical company Ciba Geigy in Goregaon (a suburb near Andheri). Oberoi has turned this area into a luxury development island and commands a 25-30% premium for its luxury residential and commercial development.
The Lodha have also launched a project called Lodha Fiorenza in Goregaon. This project has been launched with Jade Jagger, the daughter of Rolling Stones rocker Mick Jagger. Jagger has teamed up with London-based design firm Yoo Design Studio and is set to design 400 homes priced between Rs 3 crore and Rs 12 crore. The project has received a good initial response with close to 100 units sold since launch.
