With four key infrastructure projects of MMR - Mumbai metro, especially the lines which are set to be operational by 2024, Mumbai Trans Harbour Link (MTHL) and Phase 1 of both Coastal Road Project (CRP) and Navi Mumbai International Airport (NMIA), getting nearer to completion, the real estate market of the region is envisaged to see heightened activity. As per Colliers’ latest report “MMR Infrastructure – Upgrading Real Estate”, in tandem with improved connectivity, commercial office micro markets of BKC and Western suburbs will see an uptick in annual leasing. The traditional micro markets of old CBD & Central Mumbai are set to receive a major facelift while the satellite market of Navi Mumbai will offer a plethora of real estate opportunities.
While coverage and usage adoption are of paramount importance in determining the success of upcoming infrastructure projects in the real estate growth story of MMR, timely completion is equally critical in achieving the desired socio-economic outcomes. Moreover, the projects will have a multiplier effect in the region, where it will not only reduce the burden on the existing infrastructure but boost the overall economy of the region. Decongestion, connectivity improvement and a sustainable growth across micro markets are likely to solidify MMRs preferred positioning for real estate investments in India.
Expected impact of the upcoming infrastructure upgrade on office market of key business districts within MMR
A healthy visibility of near to mid-term demand and supply scenario, will eventually firm up rentals across MMR. Average rentals in prominent micro markets are likely to rise by about 5-10% by 2025 compared to current levels.”
Once operational, metro lines 2B (D. N. Nagar-Mandale) and 3 (Colaba-SEEPZ) will provide the much-needed augmentation of public transportation system in BKC and annexe, leading to a likely 1.5X annual leasing 2025 onwards as compared to the 1 msf gross leasing in 2022. The upcoming supply of 7 msf in the next three years would increase the current stock (14 msf) in BKC and annexe by about 50%, with the largest chunk to be ready once the metro lines are operational. Moreover, elevated demand levels are likely to drive average monthly rentals of BKC and annexe, higher by 5-10% by 2025 as compared to current levels.
While earlier, the average housing prices declined as one moves northwards in western suburbs, with the upcoming infrastructural development, a sense of homogeneity in housing prices is expected in the next few years. Moreover, with metro work reaching an advanced stage, the market holds immense potential for investments as the housing price differential which was more than 80% in Dahisar (compared to Santacruz) few years ago, has already moderated to less than 50%. Although, the price differentiation within Western suburbs will continue to narrow down, overall residential prices in the area are likely to further head north in the next 2-3 years. Andheri, Jogeshwari, Malad, Goregaon, Lokhandwala, Kandivali and Borivali have already witnessed a 5-10% rise in residential prices in the last 1-2 years.
At the same time, led by improved connectivity, the micro market will continue to see healthy office space uptake. 2025 onwards, annual gross leasing in Western Suburbs has the potential to reach 1.5X times 2022 levels (1.3 msf). Notably, pockets within Western suburbs such as locations along Andheri-Kurla Road and Malad-Goregaon stretch, which are preferred locations for flex operators, could see further traction in the next 1-2 years and can become the flex hot spots of the region.
With the completion of Phase 1 of the Coastal Road and MTHL, the entire Old CBD area will witness improved connectivity with Western suburbs, Central Mumbai and Navi Mumbai. This much awaited infrastructure upgrade holds innate potential to revive office demand in the micro market, which would open fresh avenues for investments. Owing to limited availability of new Grade-A office space, the micro market provides a business case for upgradation of select existing buildings and this stands at around 2 msf. The real estate space upgradation opportunity translates into an investment potential at about INR200 cr.
The upcoming metro route 3 (Colaba-SEEPZ), MTHL and Phase 1 of Coastal Road will bolster the connectivity with key business districts like old CBD and BKC. In anticipation of the upcoming infrastructure upgradation, Central Mumbai is back on the radar of developers and occupiers since the last few quarters. With likely infusion of fresh Grade-A supply having superior amenities, occupier interest is likely to continue in the next few years. Superior office amenities in turn would steadily drive the annual demand 1.5X times 2025 onwards compared to 2022 levels (0.8 msf).
Recently, developers have also been optimizing the commercial as well as residential redevelopment potential that the area holds. The report highlights that the area is likely to see about 5 msf of new office supply in the next 3 years, increasing the Grade-A stock by about 25-30%. Average quoted rentals are also likely to firm up by about 5-10% in the next 2-3 years, up from around INR 170/sf/month currently.
Completion of MTHL and development around the upcoming airport will transform the real estate landscape of Navi Mumbai. Led by enhanced connectivity, Navi Mumbai has the potential to witness about 20-25% higher annual leasing activity 2025 onwards, compared to 2022 levels (2 msf). Moreover, the micro market is likely to witness about 9 msf of supply infusion in the next 3 years, more than 75% of which pertains to IT stock.
At the same time, the report highlights that MTHL will be pivotal in connecting the data centre hotspots within Navi Mumbai with the rest of the region. MTHL will play a critical role in terms of infrastructure augmentation including buttressing of dedicated power lines, which in turn will establish Navi Mumbai as a preferred destination for DC operators within MMR. In the next 3-5 years, investment to the tune of USD 3-4 billion have been planned in data centres in the micro market.
