MUMBAI REAL ESTATE AN UPCYCLE AWAITS
According to a report by Edelweiss Securities, Mumbai’s real estate sector reported a 15% year-on-year growth and 14% sequentially with 11,340 new registrations in July alone. This is in spite of banks and housing finance companies raising interest rates on home loans by 0.9% since May this year. Overall, home registrations in 2022 till August 01 stood at 78,101 units in Mumbai, up 9% year-on-year and the average price of a new home registration in Mumbai stood at 1.22 crore, up 6% year-on-year. “The Mumbai market has been stable despite interest rate hikes and levy of metro cess. Increase in the general level of wages and employment opportunities coupled with improved affordability and return-to-work scenario is expected to keep the home buying activity healthy,” the report added. As per developers July 2022 higher property registrations in Mumbai as compared to last year is indicative of the demand continuing to be robust. Realty firms are already witnessing an upward revision in the prices due to the rise in interest rates and higher stamp duty prices. The strong sales is apparent as the home buyers have rushed in to buy properties with a fear of further increase in interest rates and eventually the property prices. Commenting on the rise in sales figures, Ram Naik, Director, The Guardians Real Estate Advisory said, "There is a genuine demand for homes in Mumbai as we can see that the increase in property prices has not affected the real estate market. Also, the successive hikes in the repo rate by the RBI has prompted home-buyers to advance their purchase decision before any further changes occur. This has led to robust demand and a positive home-buying sentiment, in the current term, which should continue to propel the growth of the sector." Indeed, with the strong consumer sentiments towards home ownership, sales momentum does seem, will continue for the coming quarters and reputed developers with a good track record will continue to dominate the market. CAPITAL VALUES SOAR Another major trend observed in Mumbai in the high-end and luxury residential segment was the rise in capital values of luxury properties and the momentum is expected to continue. Various property types across the residential real estate spectrum like residential apartment’s independent floors, independent bungalows and plots were considered in analysing the price movement and to showcase market trends over the years. As per Savills India report, the high-end and luxury residential segment in Mumbai has witnessed steady growth in capital values owing to factors like new launches with better amenities and change in buyers’ behaviour as they become more quality-conscious. The residential market is riding on the end-user’s demand and an overall increased sentiment for buying post the pandemic. This trend is likely to witness a continued momentum in the rest of 2022. The key witnessed across H1 2022 were: Price Trends: During H1 2022, Mumbai witnessed an increase of 2% YOY in average capital values for completed properties and an increase of 1% YOY in average capital values for under-construction properties. The micro market of Central Mumbai witnessed the maximum increase of 4% YOY on account of consistent demand for completed as well as under-construction properties. The market witnessed increased traction in the luxury segment. Large bungalows and prime residences were preferred, especially by end-users. Also, there were significant enquiries from NRIs to liquidate their properties, especially in the micro markets of South Mumbai and Central Mumbai. Rental Trends: Mumbai witnessed an increase of 2% YOY in average rental values. The market gained momentum as end-users are considering leasing larger homes in the backdrop of hybrid working coming into play. A large part of the HNI segment is increasingly showing a preference for renting rather than deploying significant capital for the acquisition of a self-use apartment. The micro market of Central Mumbai witnessed the maximum increase of 6% Y-o-Y and the prime Western Suburbs witnessed an increase of 1% Y-o-Y. The rental values remained stable in other micro markets. The micro markets of Prime Western Suburbs, Central Mumbai and South Mumbai witnessed increased traction in the rental properties, especially for 2 BHK configuration. MUMBAI MICRO MARKETS South Mumbai - South Mumbai, or South Bombay, or “SoBo” as the lingo goes, is one of the most desired places to buy or rent a home in Mumbai. South Mumbai mainly refers to the sea-side localities including Cuff Parade, Colaba, Nariman Point, Churchgate, Marine Drive, Napeansea Road, Malabar Hills, Breach Candy, Pedder Road, Altamount Road, Carmichael Road, Tardeo. As per Ashwin Chadha, President, India Sotheby's International Realty, in Mumbai, Ultra HNI, HNIs and professionals who become very successful, along with industrialists and actors have been the biggest buyers of luxury homes. The new addition of buyers has been start-up founders who have cashed out after a stake sale. To optimize on capital gains and for a lifestyle upgrade, they opt for real estate. Moreover, Section 54F allows them to save on capital gain tax if they reinvest in properties. “India SIR has facilitated many such transactions in the last 2 years wherein promoters have sold their stake to funds or institutions and invested in residential properties to save on capital gain tax. Sales of luxury residential properties, priced over Rs 10 crore, in Mumbai jumped more than two-fold year-on-year during 2021 and the momentum continued even in the first-half of 2022, driven by rising consumer demand for bigger homes with better amenities and low mortgage rates. The top luxury micro-markets in Mumbai are Worli, Lower Parel, Bandra, Tardeo, Prabhadevi and Andheri. India SIR has shown a growth of 30% Q-o-Q in Q1 2022-23 compared to Q1 2021-22.” Central Suburbs - Central Mumbai comprising Worli, Prabhadevi, Mahalakshmi, Lower Parel, Parel, Byculla, Wadala, Sion, Ghatkopar, Chembur, Powai, Chandivali, Kurla, offers more reasonable housing options in Mumbai. this micro-market offers dual benefits of being close to the heart of the city, and being centrally located that offers easy connectivity to all other areas in Mumbai. With an unprecedented infrastructure development, the Central suburbs are emerging as the major realty destination in Mumbai. The rapid progress on metro rail promises speedy, comfortable connectivity to any part of the city. In short, it is like living in South Mumbai (SoBo) at the cost of suburban areas. Sanjiv Chandiramani, COO - Ruparel Realty shared his views, “An important factor that is driving the buyer sentiment is the fact that the area has verything that newly-wed couples to families aspire for. From GenX entertainment, upmarket shopping to schools, colleges and health care, you name, we have it here. The development of fairly affordable commercial and office complexes is also driving the tectonic shift in businesses from SoBO to this part of the city – from Byculla, Sewree, Dadar to Chembur. Even the office rentals are relatively lower in these areas. You get much larger areas than what is available in South Mumbai at the same or reasonable cost. Planned parking for vehicle owners, access to rapid transport such as the suburban train network with stations in stone’s throw are the other major attractions. Major work force lives in suburbs, making use of the local trains to commute. They save commuting time and energy to reach offices in these areas as compared to the Southern side. The Eastern Freeway has brought Chembur much closer to South Mumbai. Today, Chembur is not even 30 minutes’ drive from SoBo. Businesses are bound to boom in Dadar-Sewree-Byculla-Parel stretch as the upcoming Mumbai Trans Harbour Link (MTHL) will ensure that people from Navi Mumbai can also land in this area in just 20 minutes. Land cost is the largest cost input for real estate development. But in Central parts, thanks to redevelopment and SRA, this aspect is taken care of, no wonder, realty registration in Central Mumbai is a tad higher than what is collected in other parts of the City. There is a definite market movement here.” Western Suburbs – Famous for being one of the most happening and cosmopolitan places and home to movie celebrities, the western suburbs also houses IT/ITeS and commercial hubs. The region consists of Bandra, Khar, Juhu, Santacruz, Vile Parle, Andheri, Jogeshwari, Goregaon, Malad, Kandivali, Borivali. Describing the growth factors of the western suburbs, Shraddha Kedia-Agarwal, Director, Transcon Developers said, "The western suburbs are witnessing traction in the high-end residential segment; the growing number of projects is a response to growth in demand. Everything from business hubs, domestic and international airports, Western Express Highway to hubs of entertainment, hospitals and educational institutions are in close proximity. Infrastructure is another key factor where metro rail connectivity has helped and soon there will be more metro links in the region." Taking into consideration the planned infrastructure initiatives like the enhanced metro connectivity and the increasing demand for office properties, one can expect considerable growth in the area’s real estate market in the near future. The upcoming Coastal Road planned between Nariman Point and Kandivali along with the Metro connectivity is touted to enhance the connectivity nexus and real estate prospects around the north corridor of Mumbai’s western suburbs. Himanshu Jain – VP-Sales, Marketing & CRM, Satellite Developers Private Limited said, "The western suburb of Mumbai is becoming an epicenter of realty transactions, both for end-users and investors. Called as the suburb with innumerable opportunities, it boasts everything from connectivity to social infrastructure to an urban lifestyle that is driving both end-users and the developers equally to it. With so much infrastructure development coming in this area, it definitely promises to be a safe bet for your real estate investments." Commenting from the investment point of view, Bhushan Nemlekar, Director, Sumit Woods Ltd. stated, “The Western suburbs fulfills the expectations of homebuyers of all categories with its wide range of options for residential properties. The area is all set to witness more developments for providing a world-class living experience for its citizens. The property prices too are expected to increase once the Metro connectivity commences. The investors too are looking up to this booming marketplace for safeguarding healthy returns.” Navi Mumbai – The real estate developers of Navi Mumbai that covers Airoli, CBD, Belapur, Ghansoli, Kharghar, Nerul, Kopar Khairane, Palm Beach Road, Seawoods, Vashi express that the region will soon see a rise in prices as the City and Industrial Development Corporation of Maharashtra Limited (CIDCO) has allowed all building proposals within a radius of 20 km from the upcoming Navi Mumbai International Airport (NMIA) to build up to 160 metres (46-48 floors), thus removing the cap of 55 metres (15-16 floors). On a positive note, the local developers express that Navi Mumbai is just starting to see an explosion in its market and once the Mumbai Trans Harbour Line gets up and running and the railways extend its line all the way to Uran, there will be a mass transit system in place that will bring Navi Mumbai in limelight. Touted as one of the most well planned cities of the country, Navi Mumbai has well developed social infrastructure, economic opportunities in addition to green open spaces and a healthy mix of affordable and luxury homes offered by CIDCO and private developers. Thane - Sale of housing units in Thane pockets grew by 25 percent in Jan-Mar 2022 against Jan-Mar 2021. Buyers were ready to shell more for localities with sound connectivity and additional space. To this end, housing locales of Ghodbunder Road, Pokhran-2, Manpada and Ambernath remained popular for 2 BHK units in Rs 70-1.5 crore budget range. Availability of spacious two-bedroom flats and seamless connectivity via Eastern and Western Suburban Railways contributed to the growth. In addition, Thane’s Ghodbunder Road is witnessing rapid real estate development with several shopping, entertainment, residential townships and commercial and office establishments coming up here. The future extension of the metro railway network will boost connectivity hugely and lead to an appreciation in capital values in the entire region. “Planned development of Thane has ensured balanced growth and even distribution of residential areas, job centres, commercial centres, retail outlets and work spaces. The city and its peripheral areas have the advantage of excellent connectivity, which makes Thane the centre-point in the mass rapid transport corridors of Mumbai and the Mumbai Metropolitan Region (MMR),” said Ajay Ashar, Chairman Ashar Group. MUMBAI OFFICE MARKET The financial capital of the country, Mumbai’s office market is driven by companies from the Banking, Financial Service, Insurance (BFSI), IT/ITeS and other service sector. Besides, it is the base for corporate headquarters of Indian as well as multinational companies. This ensures that the city has a well-diversified mix of corporate office occupiers. Business Districts The office market performance improved in the period between January – June 2022 (H1 2022) as ‘return-to-office’ trend drove occupier sentiment resulting into strong transaction volumes of 3.0 mnsq ft registering a growth of 81% YoY, as per Knight Frank. Key markets like BKC and off BKC commanded a lower market share and recorded deals amounting to 10% of the total transacted area in H1 2022. The Peripheral Business District (PBD) micro market was the major hotspot in terms of demand with 44% transacted area in H1 2022, as reputed developers are adding grade A spaces in this relatively affordable micro market has led to its rise in demand. It is followed by Secondary Business District (SBD) Western Suburbs that witnessed 22% of share contribution in the transacted area. Catering to the office demand, the new supply also primarily focussed on PBD and SBD Western suburbs. Peripheral Business District (PBD) and Secondary Business District (SBD) West micro markets contributed 31% and 28% respectively of total office space added in H1 2022. The Central Suburbs market, too, have been picked up its pace post witnessing a lull during the 2020.In terms of office rental value, BKC & Off-BKC witnessed 3% change YoY to INR 165-300 per sq ft per month. The rentals in most other micro markets remained stable across the other business districts of the city. MUMBAI RETAIL MARKET Mumbai’s mall leasing maintained its growth from the first quarter in Q2, driven by mall footfalls reaching or surpassing pre-COVID levels across the quality malls in the city, and also due to improved consumer demand and stronger business recovery by retailers. According to Retailers Association of India survey reports for the months of April and May 2022, the sales volume for west region surpassed its pre-pandemic figures (year 2019) by 24-30%, indicating a healthy recovery in retail activity. Malls witnessed increased leasing activity from Fast Fashion & apparels, Cosmetics, and F&B categories during the quarter. Prominent main streets in Mumbai continue to witness healthy leasing activity during the quarter. Retailers from F&B, Accessories, and Lifestyle brands drove the leasing momentum in the main streets. Linking Road, Colaba Causeway and Lokhandwala Andheri, the prominent main streets of the city have witnessed many retail store openings during Q2. Mall and main street rentals remained largely stable during the quarter, with some exceptions. With the decreasing vacancies across retail malls, the rental values in malls are expected to witness improvement, surpassing the pre-COVID levels, in the subsequent quarters. With improvement in leasing activity during second quarter of the year, city-level mall vacancy dropped to 8.37% in Q2 from 9.2% in the previous quarter. Superior category malls across the city witnessed a q-o-q drop of about 50 bps in vacancy levels on the back of robust demand for space, says Cushman & Wakefield report. “With expected strong growth in retail sales, mall vacancies are expected to remain low for the upcoming quarters of the year. We expect a total of 1.47 msf mall supply to be delivered by end of 2022, with BKC contributing nearly 47% of this total upcoming supply,” it states. THE STAGE IS SET TIME FOR ACTION The Mumbai property market that accounts for 10 per cent of national volumes is on the cusp. At one end there is an upsurge in demand on all fronts, the developers have already intensified their plans announcing new launches, on the other end Interest rates are on their way up and so are the property prices. For real estate industry, it translates into a developing ecosystem, where regulatory and market pressures will ensure that serious players will remain, the profit margins may get thinner and fast project completions and aggressive selling at vulnerable construction stage will be the game plan for success. However, there is no denying that having already hit a decadal high of new or primary sales in residential, the office and retail real estate seeing an uptick, the Mumbai realty market is on a high and going by overall sentiments of the industry and buyers the momentum will continue despite the pricing issues. MUMBAI METROPOLITAN REGION (MMR) WITNESSED THE HIGHEST VOLUME OF NEW LAUNCH ACTIVITY IN Q2 2022, ACCOUNTING FOR 36% OF THE NEW SUPPLY ACROSS THE TOP 7 CITIES. MMR WAS THE FRONT RUNNER IN THE LUXURY AND ULTRA-LUXURY SEGMENTS BY ACCOUNTING FOR APPROX. 57% AND 51% OF THE TOTAL SUPPLY IN THE RESPECTIVE BUDGET CATEGORIES, AS PER ANAROCK RESIDENTIAL MARKET VIEWPOINTS STUDY. THERE IS A GENUINE DEMAND FOR HOMES IN MUMBAI AS WE CAN SEE THAT THE INCREASE IN PROPERTY PRICES HAS NOT AFFECTED THE REAL ESTATE MARKET. RAM NAIK THE NEW ADDITION OF BUYERS HAS BEEN START-UP FOUNDERS WHO HAVE CASHED OUT AFTER A STAKE SALE. ASHWIN CHADHA AN IMPORTANT FACTOR THAT IS DRIVING THE BUYER SENTIMENT IS THE FACT THAT CENTRAL SUBURBS HAVE VERYTHING THAT NEWLY-WED COUPLES TO FAMILIES ASPIRE. SANJIV CHANDIRAMANI INFRASTRUCTURE IS A KEY FACTOR WHERE METRO RAIL CONNECTIVITY HAS HELPED AND SOON THERE WILL BE MORE METRO LINKS IN WESTERN SUBURBS. SHRADDHA KEDIA THE WESTERN SUBURB OF MUMBAI IS BECOMING AN EPICENTER OF REALTY TRANSACTIONS, BOTH FOR END-USERS AND INVESTORS. HIMANSHU JAIN THE WESTERN SUBURBS FULFILLS THE EXPECTATIONS OF HOMEBUYERS OF ALL CATEGORIES WITH ITS WIDE RANGE OF OPTIONS. BHUSHAN NEMLEKAR THANE THE CENTRE-POINT IN THE MASS RAPID TRANSPORT CORRIDORS OF MUMBAI AND THE MUMBAI METROPOLITAN REGION (MMR). AJAY ASHAR
Tags : Mumbai Real Estate Edelweiss Securities Ram Naik Director The Guardians Real Estate Advisory Savills luxury residential Rental Trends South Mumbai Ashwin Chadha President India Sotheby's International Realty Sanjiv Chandiramani COO Ruparel Realty Shraddha Kedia-Agarwal Director Transcon Developers Ajay Ashar Chairman Ashar Group Himanshu Jain Bhushan Nemlekar