Mumbai’s 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 of the world, in Mumbai prices 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, which currently sit 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 the 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 too uncommon. A 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 property pockets in South Mumbai, where luxury apartments have become 25-30% more expensive than a year ago.
It’s been a mixed bag in 2011 though, where the glut of apartments in central Mumbai can play a bad sport and one can see some correction in prices. According to brokers’ estimates, around 40% of the luxury apartments being built in Mumbai have not been sold. Buyers in markets like downtown Mumbai are not buying at the high rates of INR 25,000 per square foot. And as a result, pre-sales (in which residential apartments are typically sold before they are fully built) have fallen. This has resulted in construction delays as Indian developers want to ensure they don’t have a large number of unsold units in their buildings ready.
Mumbai Luxury Residential Micromarket – South Mumbai
Mumbai basically has two luxury micro-marts: South Mumbai and Central Mumbai. The South Mumbai market consisting of areas like Malabar Hill, Cumbala Hill, Napean Sea Road etc. it’s an evergreen market with a severe shortage of land 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. The buyers are usually Indian businessmen HNI (upgrading old builds to fully loaded and feature-rich new towers), NRIs, and wealthy professionals. They typically take very small bank loans (often for tax efficiency) and are not affected by interest rate consolidation etc.
Trump Tower, Hughes Street: Donald Trump plans to bring his luxury home firm to Mumbai on Hughes Road in South Mumbai. Trump Towers is being developed together 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, gym and mini-theatre. 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 branding. According to market sources, given the small number of flats and the novelty associated with the Trump brand, the development can fetch a 20-25% premium compared to neighborhood developments in South Mumbai.
Mukesh Ambani’s Billion Dollar Home: 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 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 grandiose 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 one hundred and fifty cars. It is rumored that the house has a staff of 600 waiters.
Mumbai Luxury Residential Micromarket: Central Bombay
The central Mumbai luxury market, consisting of Lower Parel, Mahalaxmi, Worli and Elphinstone, is facing a glut of luxury development with 10 million square feet of high-end residential space in supply in 2-3 years . It is difficult to walk 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 trading at Rs 18,000-26,000 per square foot, it is hard 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 bought the land at a nominal rate years ago) willing to hold out until the market picks up. The other group of developers, say Class B, are willing to negotiate since they have a large inventory coming their way and have bought land at reasonably higher prices. As a consequence, the price quoted for two neighboring projects could have a notable variation.
The Class A developer prefers to slow down the project rather than reduce 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 recoup 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 10% to 15% price cut may be in order. The price correction can also be disguised by offering freebies like free parking and an exemption from stamp duty.
However, downtown Mumbai also witnesses some exciting super-luxury developments, some of which are Lodha’s World One and Indiabull’s Sky developments.
The One World 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 slated to break the record for the tallest residential tower currently standing at the 323-meter residential complex in Australia called “Q1.
World One will be a super-luxury development that will consist of approximately 300 units that will incorporate sustainable and ecological living principles by recycling its water, collecting rainwater and using solar energy. The building is aimed at 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 expatriate 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 Hippodrome 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 already 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 comprised 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 wealthy to the super-rich with spaces from 2,600 square feet to 13,500 square feet.
In addition to the luxurious spa and massage parlor, 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 features an ultra-modern business center and services such as concierge service for travel bookings, limousine rentals or currency exchange at the airport.
Adding to all of the above, an in-house convenience store with a pharmacy and a 24-hour coffee shop, the project promises to deliver a dazzling lifestyle.
Mumbai Luxury Residential Pop Up Micromarket – Western Suburbs
It is estimated that by 2020, people earning more than Rs 20 lakh will increase from 4 to 10 percent of Mumbai’s population, which translates to about 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 hubs. This is fueling a high 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 the 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 strong 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 pharmaceutical company Hindustan Ciba Geigy in Goregaon (a suburb near Andheri). Oberoi has developed this area into a luxury development island and commands a 25-30% premium for its luxury residential and commercial development.
The Lodhas have also launched a project called Lodha Fiorenza in Goregaon. This project has been released with Jade Jagger, the daughter of Rolling Stones rocker Mick Jagger. Jagger 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.