Despite supply going up post COVID-19, realtors in Mumbai continue to find it lucrative to launch redevelopment projects as both prices and rents have shot up
Mumbai’s changing skyline seems to suggest that the city is fast becoming like New York. Thanks to redevelopment, there’s a new skyscraper that comes up in the city every now and then. There’s also a surge in several listed developers taking up redevelopment of old buildings despite there being a massive increase in housing supply that came up after Covid-19.
According to real estate experts, this has not only resulted in capital values of apartments going up by 40-50% post redevelopment of old buildings but rents too have hit the roof since the last three years.
On June 10, two listed developers Raymond Realty, the real estate arm of Raymond Group and Man Infra Construction Limited (MICL) Group, announced acquisition of two old buildings in Bandra East area of Mumbai.
Raymond Realty said that it has been selected to redevelop a housing project in Bandra east area of Mumbai with an estimated revenue potential of more than ₹2,000 crore. Earlier, the company had signed three joint development agreements for projects in Mahim, Sion and Bandra with an estimated development value of over ₹5000 crore.
MICL also announced acquisition of a redevelopment project in Kalanagar area of Bandra east in Mumbai. The company said the project will be an ultra luxury one with a potential for construction of 5 lakh sq ft. The project is located close to the Bandra Kurla Complex (BKC), India’s costliest commercial business district.
Last month, Oberoi Realty had announced that it will redevelop seven old buildings having 504 flats in the Adarsh Nagar area of Worli, Mumbai. In return, Oberoi Realty will get 6.24 lakh sq ft RERA carpet to be sold in the open market.
In April 2024, Bengaluru-based real estate developer Puravankara Ltd was appointed as developer for Mumbai’s Pali Hill redevelopment project. The project has a cumulative estimated development potential of 4.10 lakh sq ft carpet area, with over 2.15 lakh sq ft available for sale, and a potential Gross Development Value (GDV) of over ₹2,000 crore, the company said.
Mumbai is a land-starved city and the only way realtors can develop new projects is by undertaking redevelopment.
In Mumbai. Rustomjee Group, Raymond Realty, MICL, Oberoi Realty, Ajmera Realty. Bengaluru-based Prestige Group, Puravankara, Kolte Patil Developers are among the few listed real estate developers that have redevelopment projects in their portfolio.
Boman Irani, chairman and managing director of Rustomjee Developers, in July 2023 had said that the company’s exposure to redevelopment projects was 11% at the time of going in for its IPO in November 2022, and that the share may go up to 30% going forward.
During the Q4FY24 earnings call, Irani had told investors that his company had added 15 new developments (projects) in the last two financial years, out of which 12 are redevelopment projects.
During the Q4FY24 earnings call, Irani had told investors that his company had added 15 new developments (projects) in the last two financial years, out of which 12 are redevelopment projects.
Mumbai had the country’s second highest rental yield of 4.15% in Q1 2024 among top 11 cities as against 3.5% back in 2019 – a 19% growth, according to ANAROCK, a real estate consultancy firm. According to experts, this increase in rental yields post Covid-19 times is largely on account of redevelopment-induced demand for homes.
In Mumbai, Chembur and Mulund witnessed 4% growth in rentals. In Chembur, the average rental rates in Q1 2024 stood at approximately ₹62,500 per month as against ₹60,000 per month back in Q4 2023, according to ANAROCK.
“Mumbai faces a shortage of land for greenfield development due to rising population and rapid urbanization. Thus, the imbalance in demand-supply within a dense micro market creates a rental inflationary scenario,” said Niranjan Hiranandani, chairman of Hiranandani Group.
“This flurry of redevelopment projects will push up the rental indexes until they are completed. Also, the back-to-work phenomenon has prompted migrant workers to return to cities, adding further pressure to the demand curve. This has resulted in a nearly 15% increase in the rental price index, which is expected to continue. All these factors will sustain redevelopment-led rental market buoyancy,” Hiranandani added.
