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Real Estate

Real Estate

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PROJECT REPORT ON

REAL ESTATE- Rise and fall (With special reference to Mumbai residential market)

BACHELOR OF MANAGEMENT STUDIES SEMESTER V 2009-2010

SUBMITTED:
IN PARTIAL FULFILLMENT OF RECRUITMENT FOR THE AWARD OF DEGREE OF BACHELOR OF MANAGEMENT STUDIES.

BY:

Smruti Agrawal ROLL NO: - 105

BIRLA COLLEGE OF ARTS, SCIENCE & COMMERCE MURBAD ROAD, KALYAN (W).

PROJECT REPORT ON

REAL ESTATE- Rise and fall (With special reference to Mumbai residential market)

BACHELOR OF MANAGEMENT STUDIES SEMESTER V 2009-2010

Submitted:In Partial Fulfillment Of The Requirements For The Award Of The Degree Of Bachelor Of Management Studies

By:-

Smruti Agrawal
ROLL NO: - 105

BIRLA COLLEGE OF ARTS, SCIENCE & COMMERCE, KALYAN (W)

BIRLA COLLEGE OF ARTS, SCIENCE, & COMMERCE, KALYAN (Conducted by Kalyan Citizens¶ Education Society) (Affiliated by University of Mumbai)

BACHELOR OF MANAGEMENT STUDIES

CERTIFICATE

This is to certify that Miss.Smruti Agrawal Roll No. 105 has satisfactorily carried out the project work on the topic ³³REAL ESTATE- Rise and Fall (With Special Reference to Mumbai Residential Market)´, for the V Semester of T.Y.B.M.S., in the academic year 2009-2010.

Place:-Kalyan Date:-________

__________________ Signature of Examiner

______________ BMS Co-ordinator

M. Place: Kalyan Date: ___________________ Signature of Project Guide . Roll No. of T. The information submitted is true and original to the best of my knowledge.S (Sem V).B. Smruti Agrawal.CERTIFICATE I.Rise and Fall (With Special Reference to Mumbai Residential Market)´ in the academic year 2009-2010.Y. Mr. 08 has completed project on ³REAL ESTATE. Anand Dharmadhikari hereby certify that Miss.

Smruti Agrawal.DECLARATION I. student of T.Y.Rise and Fall (With Special Reference to Mumbai Residential Market)´ I further declare that the information imparted is true and fair to the best of my knowledge. SIGNATURE SMRUTI AGRAWAL ROLL NO.M. 105 .S semester V (2009-2010) hereby declare that I have completed the project on ³REAL ESTATE.B.

Sachin Agrawal & Sales Executive of Regency Towers. . I also express my thanks to all who have either directly or indirectly supported me in shaping the project very well. I would like to thank the University of Mumbai and the College Authorities who gave me an opportunity to present my views in form of this project. Thane Mr. Sanjay Sarode for shelving out some of their precious time to provide the information required.Acknowledgement Before going on with the project study. I also want to express my heartfelt gratitude to our Course In-charge Mr. It was an amazing experience working on this project and I would once again wish to thank all the people related to it for making the task worthwhile and so much fun. Anil Tiwari for believing in me and my caliber. Anand Dharmadhikari for having spent considerable time and providing very useful information. I would also like to extend warm regards to Project Finance Evaluation Manager of Kalpataru Pvt. First and foremost I would like to thank my Project Guide Mr. I would like to extend my sincere gratitude to a few people without whom this project just wouldn¶t have been possible.Ltd. Mr.

Introduction Participants Involved In Real Estate Market Mumbai City: A Conundrum Unexplained Mumbai Residential Market Market Segmentation Rentals In Mumbai Factors Affecting Real Estate Prices Mumbai Property Boom Impact Of Recession On Real Estate Market A Picture Of Fall In Property Prices In Mumbai After The Crises Visit Report Conclusion Bibliography & Wibliography Annexures 1 6 10 24 28 39 43 48 55 60 69 75 PG.NO. PARTICULARS Executive Summary Preface 1 2 3 4 5 6 7 8 9 10 11 Real Estate. .INDEX SR.NO.

It covers residential housing. Central suburbs. business. No simple description of the city is adequate. It came as a big jolt in this forward. commercial offices and trading spaces. real estate agents. tenants. Mumbai property market has been witnessing a boom in the last decade. with highest prices throughout the country. For the last many decades. infrastructure etc. spurred on by an enormous expansion of real estate. The place is simply too complex and too diverse. where every assumption of the city¶s planners has been overtaken by its size and form. builders. villas. The rentals in Mumbai have also been a big topic in Mumbai real estate. tenants. Large developers were caught in a huge debt crisis and faced heavy losses. Thane and Extended suburbs with different property prices in every market and large players in the market.march. Mumbai has witnessed a huge amount of people migrating from all over India for employment. The rental trends in Mumbai are high-end rental apartment segment. including the air above it and the ground below it. Suddenly the demand for property had vanished and the real estate industry witnessed a huge financial turmoil. The main players in the real estate market are landlords. Mumbai market is too complex to understand so it¶s divided into six micro markets namely South Mumbai. When it was looking like the property prices are moving just one way.Executive Summary The term µReal Estate¶ is defined as land. this island city has endured an explosion of growth and change. buyers etc. Favorable government policies and such overwhelming demand have seen the property prices touch the roof. Mumbai is considered to be the financial hub of India attracting huge amount of foreign direct investment and wealth creations. developers. In this report I am focusing on Mumbai Residential Market. Navi Mumbai. and any buildings or structures on it. . Western suburbs. pent houses etc. etc. formely known as Bombay is a great city. Subprime crises happened. The house rents are touching sky which compels a majority of people to live under unhealthy atmosphere in cramped rooms or flats on a share basis. People migrating from all over the country have lead to an increase in demand for housing. Residential market in Mumbai is widely spread all over Mumbai and also has witnessed luxurious amenities. the terrace flats. studies. Mumbai.

And lastly about the Rise and fall in Mumbai Residential Market. . 3. To understand the Mumbai Residential Market. Face to face communication. trade journals and periodicals. through email. magazines.e. Objectives 1. To understand the rise and fall in property prices. about ³REAL ESTATE´ and its practical implementation in MUMBAI with special reference to RESIDENTIAL MARKET. Secondary Data: My secondary data was collected from the websites.PREFACE I have given brief description about the project i. To study about Real Estate in Residential Market 2. telephonic responses. from firms and organizations associated with Real Estate. I visited organizations like Kalpataru ltd. books. METHODOLOGY Primary Data: My primary data was collected through Interviews. And Regency Towers and interviewed the managers in related department.

REAL ESTATE.RISE AND FALL (With special reference to Mumbai Residential Market) .

Chapter 1 Real Estate- Introduction

Introduction
The term µreal estate¶ is defined as land, including the air above it and the ground below it, and any buildings or structures on it. It is also referred to as realty. It covers residential housing, commercial offices, trading spaces such as theatres, hotels and restaurants, retail outlets, industrial buildings such as factories and Government buildings. Real estate involves the purchase, sale, and development of land, residential and non-residential buildings. The main players in the real estate market are the landlords, developers, builders, real estate agents, tenants, buyers etc. The activities of the real estate sector encompass the housing and construction sectors also.

The real estate sector in India has assumed growing importance with the liberalization of the economy. The consequent increase in business opportunities and migration of the labour force has, in turn, increased the demand for commercial and housing space, especially rental housing. Developments in the real estate sector are being influenced by the developments in the retail, hospitality and entertainment (e.g., hotels, resorts, cinema theatres) industries, economic services (e.g., hospitals, schools) and information technology (IT)-enabled services (like call centres) etc. and vice versa. The real estate sector is a major employment driver, being the second largest employer next only to agriculture. This is because of the chain of backward and forward linkages that the sector has with the other sectors of the economy, especially with the housing and construction sector. About 250 ancillary industries such as cement, steel, brick, timber, building materials etc. are dependent on the real estate industry.

Features of Real Estate Markets:
In particular, the unique features of the real estate market must be accommodated. These include: ‡ Durability ‡ Heterogeneous ‡ High transaction costs ‡ Long time delays ‡ Both an investment good and consumption good ‡ Immobility

Overview:Indian real estate sector is growing at thirty percent annually. The liberalized urban policy frame work along with a stable home loan rates by Banks helped this growth phase to sustain. The parameters for investment are changing and more FDI is expected to flow into this sector in the coming period. The Indian real estate sector has witnessed a resounding growth in recent years due to factors like liberalization of urban policy and increased competition in the home loan segment. Also the booming Indian economy, favorable demographics transition and liberalized foreign direct investment (FDI) regime acted as a catalyst in this growth phase. Growing at a rate of 30 per cent, the real estate sector has emerged as one of the fastest growing investment areas for domestic as well as foreign investors. The sector will remain as a booming sector and more investment is expected in the coming years. Construction and allied sectors are considered as one of the largest employing sector in India (including construction and facilities management). This vital sector is linked to about 300 ancillary industries like cement, brick and steel. So this sector has a strong backward and forward linkages and the growth will translate into an over all positive impact on these ancillary sectors too. Resultantly, a unit increase in expenditure in this sector has a multiplier effect and the capacity to generate income as high as 4.5 times.

city and regional level infrastructure) subject to certain guidelines. foreign investors have raised nearly US$ 30 billion since March 2005 for investing in Indian real estate. According Research.sq. educational institutions.50 billion. built-up infrastructure and construction development projects (which would include. hospitals.ft. foreign direct investment (FDI) inflows into the sector are estimated to be between US$ 5 billion and US$ 5. a study by research firm. With the significant investment opportunities emerging in this industry. resorts. . there will be demand for over 24. commercial premises. which is double the profitability for a construction project undertaken in the US. recreational facilities. hotels. but not be restricted to. Total supply all over India is 530.According to Mckinsey report the average profit from construction in India is 18%. the to new Knight residential Frank space distribution of Pan India will be more then that of before. Five per cent of the country¶s GDP is contributed by the housing sector. Distribution in all the places is as per the demand and availability of space. The NCR will be having maximum of distribution all over India that is 35%. Indicus Analytics. In the next three or four or five years this contribution to the GDP is expected to rise to 6%. says a report by Merrill Lynch. As a result of this. an estimated US$ 25 billion investment will be required over the next five years in urban housing. this real estate sector is likely to throw huge investment opportunities.5mn.3 million new dwellings for selfliving in urban India alone by 2015. a large number of international real estate players have entered the country. According to µHousing Skyline of India 2007-08¶. In fact. housing. 100% FDI is allowed under automatic route in townships. housing. According to Cushman & Wakefield. Currently.

HSBC Financial Services.6 billion. Also with rising input costs of steel. to adjust their share market losses. which can affect development plans of builders. Warbus Pincus. another US$ 10-20 billion would pour into the sector in the next three years. there may be a delay in project completion leading to financial constraints.Leading companies like Carlyle. There is an overall slowdown in demand across India as has been experienced by industry players. The slowdown is aided by the fall in stock markets as wealth creation does not happen and there is lack of capital among investors to invest in real estate projects. The talks of new malls. Americorp Ventures. Many residential buyers are waiting a price correction before buying a property. it has become unviable for builders to construct properties at agreed prices. many investors are forced to sell off their real estate properties. Also income levels have not risen in proportion to the increase in property prices thus forcing many potential buyers out of the market. Property prices and rentals are correcting which have led to the erosion in market capitalization of many listed players like DLF and Unitech. with 32 deals valued at US$ 2. As a result. Also. And according to industry estimates. complexes. Blackstone. . Morgan Stanley. residential projects being built are all now being kept under bags. Other factors that have led to the slowdown is the increase in interest rates leading to higher costs. Real estate accounted for 26 per cent of total value of private equity investments. Current scenario:The unending euphoria of real estate sector in India witnessed during the last few years is finally starting showing signs of ebbing. Barclays and Citigroup are some of the international players who have entered into Indian reality market. Trikona. iron and building material.

there may be further constraints on residential as well as commercial demand since IT/ITES segment accounts for 70% of the total commercial demand.Also with IT industry continuously experiencing a slowdown. Only those players who have achieved substantial revenues from past deals could expect to rise against the tide. . But the scenario may get worsen if the upcoming properties are not sold off as it may lead to a financial crisis in the property market. So real estate players may continue to face liquidity concerns in future due to rising costs and unfavorable stock market conditions for further capital raising.

Chapter 2 PARTICIPANTS INVOLVED IN REAL ESTATE MARKET .

There are various individuals who all take part in Real estate. tax benefits and leverage. DEVELOPERS: . investors choose real estate for several reasons: cash flow. They purchase houses or commercial property as an investment and also to live in or utilize as a business. develop the building program and design. and sell it later for a profit. They are the one who are involved in Real Estate. They are as follows:- OWNER: These people are pure investors. INVESTORS: . depreciation. An active investor may buy a property.Developers purchase a tract of land. determine the marketing of the property. They do not consume but rent out or lease the property to someone else.A real estate investor is someone who actively or passively invests in real estate. A passive investor might hire a firm to find and manage an investment property for him.Participants in Real Estate Participants are very important in Real estate as they are the Backbone of Real Estate market. appreciation. They are the one who carry out transactions in real estate market. obtain the necessary . make repairs and/or improvements to the property. Typically.

roofing etc. For example. who carries out a contract that is related to building of architecture or providing the building material.Real estate investment banker provides innovative approach to financing of real estate. AGENTS: . CONTRACTORS: .e.Real estate contractor can be described as a person. a contractor also provides labor for the construction purposes. Real Estate agents are Present in every . maintaining the structure etc. Real Estate agents have been helping buyer to buy and seller to sell the property.Real Estate Agents are employed by the seller to get the best price and conditions for the seller. manage.public approvals and financing. All real estate contractors are professionals and licenses that permit them to perform certain tasks as mentioned in the license. There are many types of services carried out by real estate investment banker and these services are far beyond the traditional banking services being offered. and lease. In some cases. Some real estate contractors also provide services related to remodeling of buildings. Some contractors also provide services after the completion of the construction work i. BANKERS: . build the structure. and ultimately sell it. structuring of various types of real estate projects is one main type of service provided by real estate investment banker.

.corner of world.They have the complete ownership of the property but they lease or mortgage their property to someone else.A Real estate broker finds buyers for those wanting to sell real estate and finds sellers for those wanting to buy real estate. BROKER: . the real estate broker receives a commission for his or her service. MORTGAGER: The security created on the property by the lender. These people are pure consumers. they also help buyers purchase property for the best possible price. They all act as middlemen between the Buyer and the seller. which will usually include certain restrictions on the use or disposal of the property (such as paying any outstanding debt before selling the property). LESSOR: . High amount of rent is charged by the renters. Real estate brokers help sellers market their property and sell it for the highest possible price. Once the broker successfully finds a buyer.

They pay for the property. retail). The tenant will pay the rent for the leased property to the owner. . The property can be in any form. BUYERS: . Buyers are the one who have bargaining power. commercial. then the person who takes for lease from the owner is called as a tenant and the relation between them is called as tenancy.Buyers are one who purchases the property.TENANT:-When a land owner or a house owner allows some one to use his/her land or house in some way for some time period. (Residential.

Chapter 3 MUMBAI CITY: A CONUNDRUM UNEXPLAINED .

This city is aptly called the commercial capital of India as forty percent of India's taxes come from this city alone. such as the Reserve Bank of India (RBI). it is a great city««. Mumbai is home to Marathi television and Marathi film industry as well. but a terrible place with a very large population!¶ Mumbai is India in microcosm in the true sense as it represents all facets of modern India.. formerly known as Bombay. the Bombay Stock Exchange (BSE). The city is base to conglomerates . Besides this India's Hindi film and television industry. today it's a teeming metropolis and commercial hub of one of the world's most promising economy.Real Estate in Mumbai Mumbai City µMumbai. Once a humid tropical archipelago of seven islands. it houses important financial institutions. the National Stock Exchange of India (NSE) and the corporate headquarters of many big Indian companies as well as Multinational companies. Being commercial capital the of India.

Flora fountain. Marine Drive. The city also has the Chhatrapati Shivaji Terminus (earlier named Victoria Terminus) and Elephanta Caves as UNESCO World Heritage Sites. Besides these. Alongside this growth. diamondpolishing. engineering. Juhu Beach. Charles Correa¶s famous remark encapsulates the challenge of defining the essential spirit of Mumbai. Tomb of Haji Ali. Girgaum Chowpatti. Crawford Bazaar. must visit places include Gateway of India. Tata Group. For the last many decades. The industry base has diversified from textile mills and the seaport to IT. healthcare and atomic research. until very of recently. spurred on by an enormous expansion of real estate. No simple description of the city is adequate ± the place is simply too complex and too diverse. Essel World. where every assumption of the city¶s planners has been overtaken by its size and form. Hanging Gardens. Film City. Mumbai completely urbanization occurred almost without adequate finance and with very little local government responsiveness ± other than to enforce a very tightly-controlled regulatory system. Mumbai Devi Temple and Mahalakshmi temple. Malabar Hills. Prince of Wales Museum. Godrej and Reliance. Kalbadevi. Siddhivinayak. this island city has endured an explosion of growth and change. It was a system which effectively froze large blocks of real estate stock that could . LIC. Telecom. Nariman Point.like State Bank of India.

occupies 437 square kilometers of area on a long and narrow piece of land that juts out of the western coast of India into the Arabian Sea. Geographical constraints:In India. It is also one of the rare big cities with a natural forest within its limits. and created very expensive price points for consumers. The Sanjay Gandhi National Park.respond very slowly to changing demands. as one of the foremost port cities of South Asia. It is separated from the mainland on the east for most of its length by the Thane creek. The linearity of the city¶s geographical base is further heightened by . It also produced a shortage of basic infrastructure capital. a protected forest. Mumbai city. this section adequately highlights the assortment of some limited issues that are hampering the spatial growth of Mumbai. Three of these cities ± Mumbai. Kolkata and Chennai ± were created by the British as trading centres connected to international maritime trade routes. They therefore owe their very existence to the peculiarities of geography that enabled them to become important ports. riversides and sea-sides are the sites of many important cities. which connects to the Mahim creek as well as the region along Malad creek. But the following part of this section would attempt to provide a broad understanding of the various dimensions of this city: physical. The edge condition is a huge part of the city. Though the city¶s real estate has many more dimensions. Add to that the Mithi River. drives a large wedge into the land mass in the northern part of the city. The complete morphology of Mumbai¶s real estate is too elaborate. governance and transportation. complex and beyond the scope of this study. regulatory. also due to a variety of human interventions like the urban rail and road transport corridors. Mumbai¶s development has basically been a negotiation with the edges of each of the seven islands as well as of the larger island of Salsette which houses the extended suburbs is the major part of the city¶s footprint today.

being under the control of the Indian Navy. it is instructive to observe the decay and growth of its mill lands as well. for over a century been the lifeblood of Mumbai¶s textile workers. It was in the late seventies. Mumbai¶s seaside on the east and the west has a very different relationship to the rest of the city. a state body. According to municipal development rules. On the north-eastern extremity of this seaside edge is the large and sensitive installation of the Bhabha Atomic Research Centre at Trombay. many businesses and industries sold their lands for a profit and moved elsewhere. the western edge of the city is the most sought after area. In many ways then. the eastern edge is a zone of restricted access. However. much of this land could be handed over to the city for its developmental needs without disturbing the port¶s activity. and is the bone of contention between the trust and civic activists for approximately 400 hectares of high value land in the island city.the manner in which the two railway lines and two major interstate highways break it up into thinner strips. Much of the land along this edge is owned by the Mumbai Port Trust. the mill lands are reserved for . having witnessed maximum real estate development and characterized by high density of population. The space of the city as a whole truly begins to connect with the Arabian Sea from Cuffe Parade northwards. the mills and mill-owners could not avail of this profitable opportunity. On the contrary. The southern tip of the city where the eastern and western edges meet is again largely inaccessible to the city. the eastern edge is currently occupied by the port. were. It is argued by some that with the greater success of Nhava Sheva port across the water on the mainland. the connection being consolidated truly for the first time at Marine Drive. which virtually cuts the city off from the sea. oil refineries and related activities of storage and manufacturing. sandwiched between the business districts of the southern island city and the expanding suburbs to the north. To look at the hinterland of Mumbai. At this point in time. The eighteen square miles covering central Mumbai. when hoarding of urban land and the nonimplementation of the Urban Land Ceiling Act 1976 caused a rise in real estate values. which has been off limits to the public. Broadly.

in response to structural adjustment polices of liberalization and echoing the need of global and domestic capital permitted the sale of 15% of land in these textile mills. symbolized by the chimneys of the mills and and chawls around them. In contrast to other topographically-constrained cities. This is why cities located on islands (New York. reflecting the closure of manufacturing and industry as it existed in the city. London and Berlin) are not. These new regulations in urban land-use rules repealed the older zoning regulations. Hong Kong or Singapore) are well known for their skyscrapers while cities located in flat plains without major water barriers (like Paris.industrial use. these mills fell into wide-spread bankruptcy in the 1970s and in early 1980s. away from the grimy industrial stage of growth. . Mumbai¶s development has been drastically restricted by the building height restrictions embodied in Floor Space Index (FSI) regulations. which has left large portions of central city land ± the Port Trust and Mill Lands ± idle for more than twenty years. Resultantly. has caused a dramatic increase in real estate prices. FSI is the maximum permissible ratio of floor space (or built-up) area to plot area that was first introduced in 1964. Cities with such constraints on supply of land typically compensate in two ways: by increasing the height of buildings. and by building bridges to connect the various land masses. the occupation of these mills by corporate and service sector industries is seen by many as symbolic of the shift in Mumbai¶s political economy. Regulatory landscape:Mumbai is one of the few developing country cities to undergo a process of deindustrialization. The new Development Control Rules of 1991 framed by the state Government. as they were by and large given to the mill owners at concessional rates by the colonial Bombay Government in the beginning of the century. This freezing of a significant share of central city land. to a post-industrial. Today. Some economists have called this phenomenon ³deindustrialization´. service-centred economy. in what is among the most topographically-challenged of the world¶s largest cities.

However.00 in the suburbs).33 (1. a ratio of about 30.5 in the suburbs. that isles than 4 percent of the ratio of 30 that characterizes New York. it is not low everywhere.5 in North West Suburb of Gorai. What we see here is that beside the low overall FSI (compared to global cities) there is also lack of variation in FSI across the city. they were substantially reduced through the modified 1991 DCRs to the range of 1.33 in the city to 0. For instance the highest FSI in residential areas in New York is 15 while it is 0. However.5 for CBD compared to 1 for suburbs. 0.5 in the areas beyond suburbs (in rural areas). . the highest this ratio become is about 4 (2 in Bandra Kurla. in the CBD. it is common for the ratio between the highest FSI value. to the lowest in the suburbs to be 30 or more.33 in the Island city and 1. For example. The spatial distribution of FSI restrictions in Mumbai is shown in the above map. for 90 percent of the municipal area the ratio is only 1. in step-wise decrease based on the concept of one-third ground coverage. This pattern is in sharp contrast to most other cities where even if the overall FSI is low. while confining to the one-third ground coverage rule.These development Control Regulations (DCRs) prescribed FSI as high as 4. In Mumbai.

Under this act. Similar provisions enabling acquisition of land at less than market price are found in other legislation such as Mumbai Metropolitan Region Development Authority Act 1975 and the Maharashtra Housing and Area Development Act 1976. However. a development or any other town plan. after the publication of a draft regional plan. acquisition of land can proceed as it is deemed to be land needed for public purpose. Another restrictive legislation has been the Rent Control Act 1947. These building bylaws use parameters like ground coverage. The Act did not achieve the objectives it was enacted. They form an integral part of the development plan prepared by the municipal corporation of greater Mumbai (MCGM). specified the ceiling limits applicable to different categories of urban agglomerations. the execution of any work of improvement of any slum area or redevelopment of clearance area is considered a public purpose. maximum height. through Slum Improvement Act 1971. light angle and height in relation to width of road to control the volume of built-up area on a given plot of land. which is a part of the larger system of land use regulation in Mumbai. The Act required that market value (and not registered value) of land as the basic principle of determining compensation for land acquisition. Moreover. The intervention by state for urban land market was first articulated in Land Acquisition Act 1894. Registered price is typically lower than the market price due to the prevalence of parallel economy in land and real estate markets. Urban Land Ceiling Act 1976. which got repealed recently.Density regulation is an important development control regulation. and the provisions resulted in increase in land prices. The second important piece of legislation is in the form of Maharashtra Regional and Town planning Act 1966. Development control regulations (DCR) in Mumbai cover provisions in land use zones density zoning in terms of dwelling units per unit area and the total development area. Similarly. which froze the rents to their 1940 level for all buildings rented at that . the process of obtaining exemptions helped rent seeking behavior and made the land market more oligopolistic. for compulsory acquisition of land for public purpose. and was subsequently amended in 1984. there exists another class of development regulations that operate through building bylaws laid by the MCGM in the same DCRs.

According to development control regulations. when nearly 3000 hectares of land was brought under development through town planning schemes.70. bonus FSI could be used on the remaining plots. The Mumbai real estate planners have adopted some other innovative approaches as well. This was not very successful. In 1970 CIDCO was established as a new town development corporation for developing Navi Mumbai. the earliest strategic response of Mumbai was in 1930 ± 1960. Wherever the properties were already rented (when the Act was brought in) the landlords lost their interest in the upkeep of the buildings. the policy makers of Mumbai realized the limitation of strong intervention in land market and instead started using market oriented policies to the extent feasible development of land and real estate. Under the above mentioned regulatory framework. Property tax which is levied on the basis of annual rent could not fulfill the objectives of land taxation. the development right on the land reserved for public infrastructure (like roads) could be transferred by the land owner to his remaining land if he agreed to had over the land to local authority free of cost and . By 1993. the Rent Act had a serious impact on city¶s ability to raise resources. It became clear from this experience that public ownership of land alone cannot promote development of new town which could attract growth away from Mumbai. For example. as the real estate prices increased. if certain portion of land is developed in the form of small plots and are handed to public agencies at predetermined price. This plan recommended development of a new town of 2 million populations across the harbor of Mumbai as a counter magnet of Mumbai. In such a scenario.105 hectares of land was acquired and 1501 hectares leased out. The Revised Regional Plan of MMR proposed that the land development should be left to the market. However. As is evident from the above analysis. Apart from this direct impact. and only a structure plan showing arterial road network and critical land uses were prepared. This process is guided by a system of incentives by way of bonus FSI.time. 14. and was followed by first regional plan of Mumbai Metropolitan Region (MMR) during 1967. large scale acquisition became increasingly difficult as farmers started demanding high share of the proceeds. market would willingly provide for using land for public use instead of resisting it.

this measure succeeded as land prices are several times higher than construction cost. the land owners are expected to agree to transfer their development rights from high value area to generally low value area. Offering extra FSI or development rights is now seen as a panacea for many of Mumbai¶s problems ± obtaining land for public purpose. the regulations allow the land owner to transfer development rights elsewhere. This principle has been extended further in the Development Control Regulations 1991 in the form of Accommodation Reservation and Transfer of Development Rights. There are various types of Transfer of development rights (TDR) or incentive FSI available (Road TDR. though. providing free houses to slum dwellers and the tenants of the old rent controlled buildings and generating financial resources. The government has also provisioned to invite private investment in the reconstruction of such buildings. . Slum TDR. Heritage TDR. In both the schemes. hand it over to Municipal Corporation free of cost and then utilize the development right equivalent to the full permissible FSI for his own purpose. Accommodation Reservation: The land owner can develop the facility for which the land is reserved. where 50 percent of the floor space required for rehabilitation of existing tenants as the bonus FSI.encumbrances. dilapidated building incentive FSI and schools. and the planners have tried to see that TDR flows from congested areas to relatively low density areas. if the land is question is surrendered to municipal corporation free of cost and free of encumbrances. In case of Mumbai. without any weightage to price differential. almost all the experts are of the opinion that the FSI availability in Mumbai is a constrain in the growth of real estate space and needs to be relooked along with the other factors on urban infrastructure. In effect. Reservation TDR. Transfer of Development Rights: Where the land has to be exclusively put to reserved use or where no building construction is possible (as in case of a garden). hospitals and hotel incentive FSI).

The adjacent graph depicts the plan for Coastal Regulation Zoning of Mumbai. a large part of Mumbai falls into the Coastal Regulation Zone (CRZ) area. and only repairs and reconstruction is allowed Out of total area 437sqkm. Hong Kong. and 25 sq km is in CRZ III. where no development is permitted ‡ CRZ II (Yellow colour): has Where already is substantial occurred. This basically implies that no construction is allowed on the seaward side of existing roads or authorized structures. It has been argued by some experts that with such regulation in place cities like Manhattan. the city is divided into three zones as: ‡ CRZ I (Blue colour): Area between the high tide and low tide line. The CRZ regulations further reduce the supply and have had an impact in accentuating the paucity of land in the city. 100 square kms is in CRZ II. As is evident. Based on this regulation. San Francisco and Rio de Janeiro would have never been built. controlled development but further development ‡ CRZ III (Green colour): Where sporadic development has occurred. . While these regulations are justified to protect coastal zones in rural areas it seems odd that this law exists in a city built on a narrow peninsula. Singapore. 133sqkm is in CRZ I.

occupying 466 square km is often confused with the Mumbai Metropolitan Region. whereas. the city proper. which is almost ten times bigger (4.355 square km) and includes the outlying townships of Kalyan and Thane. during the last three decades population growth in island city has been negligible. Attempts to shift jobs to more accessible areas of the region have initially not succeeded. About a third of Greater Mumbai¶s population lives on the southern µfinger¶ of the island. This is largely seen as a result of real estate speculation and greater interest in developing South Mumbai. with more than two-thirds of the jobs located there. The western suburbs have more population than that residing . that in the suburbs have increased at fairly high rate. the population in island-city increased steadily and was always more than that of the suburbs during that period. However. which are 1 million-plus cities in their own right. In the last quarter of the 20 century though. According to some projections. where the chronic shortage of office space promised far higher returns. Till 1971. This is partly because Greater Mumbai.Urban infrastructure:Mumbai means different areas for different people and many citizens are only dimly aware that it ranks as a mega-city with more than 12 million inhabitants. Navi Mumbai on the other side of Thane creek has vast amounts of housing and office buildings that are slowly beginning to be occupied. The main city continues to grow at an astounding pace. Mumbai will have around 27 million people by 2020. a distinct change of in the spatial was th distribution population observed within Greater Mumbai.

According to the International Institute of Population Studies. which . size does matter. Government in Mumbai operates much the same way. km. Maharashtra has also created a large number of uni-functional bodies for the city. only 480 people come into the city every day. with Tokyo trailing at 27. The proportions have now that formal employment in the city is declining. Gross density of greater Mumbai is increasing and was found to be 24806 persons per sq. Migration as a proportion of the total population is also declining. According to the Washington based Population Institute. in 2001. km. In the 1970s. Greater Mumbai had a population of just under 12 million. especially the 100 square km of the island city.3 million.734 persons per sq. or that the city¶s structure can be represented with a list of agencies and functions. The outlying areas of the metropolitan region are expanding faster than the core.5 million. The area around marine lines continues to have the highest density of 112. In addition to exercising direct authority in Mumbai through the commissioner. The power to both make and implement policy in Mumbai is indeed divided between a number of actors: some. thus it has presumably a population of somewhere close to 15 or 16 million now.in eastern Suburbs. chemical factories and even some multinational industries. While the rate of growth may not be dramatic. the metropolitan region in 2020 will be the world¶s most populous at 28. national and state government has the same ostensible mission as local government . the proportion of migrants was close to 70 per cent with a natural increase of 30 per cent. with the closure of mills. A common misperception about the city is that there is a single ³Government of Mumbai.to represent and provide services to citizens-yet the scale on which authorities are created still matters greatly. According to the last census in 2001. such as the Municipal Commissioner (who is appointed by the state of Maharashtra) and councillors on the Municipal Corporation (that are locally elected) along with Mumbai-specific entities created by state or federal government (such as the Mumbai Port Trust) and other broad state agencies which operate both in Mumbai and in the rest of Maharashtra.

but can also itself build roads. However.648 crore Mumbai Urban Infrastructure Project (MUIP) supported by the GoM. but in the last few decades. with the main objective of road network improvements and efficient traffic dispersal system in the city. This includes proposals for an µinner ring rail loop¶ (linking Goregaon. Andheri. a lot of initiatives are underway to improve the transport infrastructure of the city. There is also a proposal for Mumbai metro.´ including Transport and Urban Development.71 square kilometres Municipal Corporation. the value of connectivity is even more pronounced.exercise at times unilateral control over huge policy areas. construction of which has now been awarded to a private company. . This authority was charged with implementing a state devised and approved redevelopment plan.526 crore. the Rs 2. The suburban railway system in Mumbai has been its lifeline since its inception way back in 1925. and the Bandra-Worli tollway sealink project. an µinner ring freeway link¶ (between the under-construction Bandra-Nariman Point sealink and the proposed East Island freeway). and is the direct recipient of World Bank funding. the MUIP is to supplement MUTP. While the MUTP is for the mass transportation. and even manage traffic. which includes Mumbai Metropolitan Region Development Authority (MMRDA). This means it has the power to not just coordinate regional planning across jurisdictions. which delineated a 4. Transport projects are already under implementation in the city through the Rs 4. World Bank supported Mumbai Urban Transport Project (MUTP). and an µouter ring-rail and freeway link¶ (that will connect the island city eastwards and northwards to Nhava Sheva and the Mumbai-Pune expressway. and other infrastructure. This body has jurisdiction over an area almost 10 times the size of the 437.355 square kilometre ³Metropolitan Region.´ In this capacity. the Bandra-Kurla Complex and the Andheri-Ghatkopar stretch). then back to the Vashi-Belapur expressway and Kurla in the eastern suburbs). In a city like Mumbai which has a number of topographical constraints. it has shown signs of decay. the Authority directly funds and partially implements many of Mumbai¶s recent major ³Projects. Bandra. There is a great emphasis on the road projects in the city. rails.

52 in Bangalore. and dwell more on building the institutional foundations for a healthy city. such projects are essential. Solving the problems of Mumbai requires a shift away from an immediate focus on a few high-profile projects (such as the second airport project or a metro project). regulatory and infrastructure movements. they are not the mainstay and can only have an incremental impact in resolving the land and other urban problem.A program of transforming urban infrastructure in Mumbai has dimensions of institutional. 100 in New Delhi. . 12 in Singapore. Although. and as high as 115 in Mumbai. Ratio of land cost per sq meter to per capita GDP is 2 in Kuala Lumpur. 7 in Bangkok. fiscal financial reform that merits a separate analysis. It will be imperative for policy makers to improve the built-up area and/or land prices relative to income levels. 6 in Sydney. This clearly is not a sustainable position and the future growth of Mumbai¶s real estate will rest a great deal on policies are maneuvered to accommodate the above mentioned conundrum of geographical.

Chapter 4 MUMBAI RESIDENTIAL MARKET .

Malabar Hills. buying a home has always remained a dream for most even if they earn seven. Panvel and Kalamboli in Navi Mumbai and Mira Road. Marine Lines. Vasai. As the financial capital of India. buying a home remains a dream for most expensive city. Some real estate markets in Mumbai have been prone to pronounced bursts of development activity while others have been characterized by smooth pattern of development over time.Mumbai Residential Market Introduction:Mumbai is a squatters¶ paradise. and Nepean Sea and in South Mumbai and Khar and Santacruz in western sub-urbs. Nallaspora and Virar in western sub-urbs. In the world¶s seventh most expensive city. Mumbai though is unique. Mumbai Real Estate Market records the maximum realty rates in India in certain areas like Cuffe Parade. Kalyan and Ambernath in Central Mumbai. Nariman Point. The natural and regulatory restriction on the land supply has resulted in a situation where a substantial increase in demand has more than proportionately increased the prices of residential space. With the opening of Indian economy in the early 90s.figure salaries. where along with the bursts of activity it has always had supply-demand dynamics evolving in the last fifteen years. Year 1995 saw a peak in real estate prices across Mumbai and from 1995 to about 2001 the market saw a downtrend and . More economical residential realty options are available in Mahim in South Mumbai. the city is not just a gateway to almost all the multinational firms but also appear prominently as a location preference for corporate office of Indian industry. the city has seen manifold increase in the demand for space. Bhayander.

The residential real estate construction is largely concentrated in the suburbs. It is the fifth most expensive city in the world.developed areas with amenities and proximity to the leisure world. Since then the market has managed a spectacular recovery and the market was back to the 1995 levels in 2005 even surpassing it at some locations. but now again market saw a fall due to economic recession in country. Due to its unique shape and long distance to be traveled. Suburban locations of Bandra. Atlamount Road and Central Mumbai locations of Prabhadevi and Worli. Juhu and Versova are also sought after residential locations due to excellent social infrastructure and their proximity to the airports and the Suburban Business Districts (SBD) of Bandra-Kurla Complex. accessibility of road and rail is of paramount importance and commands a premium. a loading of 33-35 percent (carpet area to super-built up area) is seen on an average. Overview:Mumbai is unique city with linear shape and is surrounded by sea on three sides.. The average area of the apartments is smaller in Mumbai when compared with other Indian metros. infrastructural development. Typically. with the city growing towards north and the development of Navi Mumbai. Santacruz. South Mumbai and CBD (commercial business district) have limited supply of land parcels for residential development. Peak rates in CBD have lead to growth in suburban areas.rise buildings form around 80percent of supply. Other western suburban . The high-end residential market is concentrated in South Mumbai locations. Cuffe Parade. Khar. Within the existing stock of houses. about 800sq ft. Napeansea Road. 1BHK measures around 600sq ft and a 2BHK. Malabar Hill. viz. availability of schools. The other factors that attract households to a given residential area are proximity to workplace. well. typical residential configurations are1BHK and 2BHK. High. leading to high cost of real estate. Andheri and Powai-Vikroli.stagnation. while limited township concepts have been developed in centrally located areas.

Kandivali. Runwal group. K Raheja universal group. Hiranandani Gardens. Kanakia Spaces Pvt Ltd. The most recent trend among many builders is the creation of entire townships in areas with availability of vast stretches of lionsanduct. There are large number of players in this market like Hiranandani constructions. Kalpataru developers. Bhandup and Mulund have witnessed large-scale developments in the residential sector. Malad. Ghatkopar. Ltd. Aditya Builders. and central suburban locations of Powai.Godrej Properties. Ahuja constructions. Shapoorji Pallonji & Co. and many more. Oberoi Constructions Nirmal Lifestyle group. Andheri .locations of Goregaon.. Powai Akruti Orchid Park. HDIL.. Vasai and Virar have seen development of many such townships. Locations like Thane. Akruti Nirmaan. Lodha group.

The residential demand has shifted from South Mumbai to North Mumbai owing to new supply and comparatively lower price points.ft.sq. of residential space to the residential stock. Majority of this supply is again concentrated in the suburban locations.Residential Supply and Demand:The residential market in Mumbai is presently witnessing acute shortage of ready apartments in the mid-end segment. This takes into account the spill over of delayed projects. amounting to about 75% of the total supply in 2007. The year 2007 saw as addition of approximately 33 mn. Under-construction projects are being booked at a swift rate with buyers reserving apartments long ahead. employees in these organizations prefer affordable and new accommodations in the suburban locations in close vicinity.ft. The year 2008 will see an infusion of about 36 mn. The residential developments on the mill lands of Central Mumbai have also added substantially to the current stock. Majority of the newly constructed or underconstruction properties listed in our database have occupancy of close to 80% depicting strong demand situation. Bulk of this space. of residential space. which were scheduled to be completed in 2007. is concentrated in the suburban locations from Bandra to Dahisar and Kurla to Mulund.sq. In addition. with Suburban Business District emerging as a favored office. Destination. .

Chapter 5 MARKET SEGMENTATION .

includes Bhayander. Thane:. Malad and many more 3. Sanpada 6.includes the North Mumbai i. South Mumbai: includes area from cuffe parade to Mahim 2. Panvel.includes area from Sion to Mulund 4. Airoli. Andheri.includes Glady's Alwares Road. Kopar Khairane. Western suburbs:. Nerul. Central suburbs:. Borivali.1 and 2 5. Extended Suburbs:. Navi Mumbai:. Ambernath.Market segmentation The division of Residential market in Mumbai has been done into following Six MicroMarkets:1. Pokhran Road No. Bandra. Ghodbunder Road.includes Vashi. Kalyan. Vasai-Virar . Belapur. Khar.e.

South Mumbai hotels such as Taj Mahal.30. South Mumbai is home to the elites of Mumbai city. If South Mumbai attracts businessman from all over the world. South Mumbai locations of Malabar Hill.000-45. Locations of Mumbai Central. With business centers such as Nariman Point and the Ballard Estate and Financial organizations such as the Reserve Bank of India and Bombay Stock Exchange.500-14.000-50. Most buildings in South Mumbai command a premium as they offer a spectacular sea-view.ft.000 20. Few of the new residential projects that are being launched in this market command rates as high as Rs.000 13. it is one of the busiest parts of the country.ft.000/sq.000-65. hotel Searock Sheraton.000-24.000-65.South Mumbai:Located on the southern most corner of Salsette Island. This can also be attributed to NRIs scouting for properties here.000/sq.Times Property Rs. with number of museums and tourist haunts it is equally interesting to the backpackers.12.000-30. Carmichael Road.ft 20.000 14.000-22. Cuffe Parade and Atlamount Road witnessed heightened demand for high-end residential properties due to restricted supply. Napeansea Road.000 8.000-21./sq.000 18. Tardeo Road and Grant Road closely follow the prime locations in terms of price and the rates here range from Rs. SOUTH MUMBAI Cuffe Parade Churchgate Marine lines Malabar Hill Napeansea Road Worli Prabhadevi Mahim Source. Lot of employment opportunities have given a rise to residential development in South Mumbai.000 18. Chalukya hotel on Elephanta island find favour all over the world. hotel Oberoi.000 .000 20..000-62.

. With capital values ranging between Rs. Andheri. 500-17. Western Suburbs:Over the years. Also. the residential demand has shifted from South Mumbai to North Mumbai on account of fresh supply and comparatively lesser capital values.The mill lands in Central Mumbai locations of Lower Parel. are expected to provide better connectivity from North Mumbai to South Mumbai. Planet Godrej on Simplex Mills by Godrej Properties and Ashok Gardens on Swan Mills by Piramals group. Prominent among them are Beaumonde Towers on Standard Mills by Sheth Builders. majority of which will be in Central Mumbai locations.ft. Huge .ft. many infrastructure development projects. In addition to this. Sion and Mazgaon range between Rs. which are currently underway.000/sq. the redevelopment projects underway are the major sources of residential supply in these locations. of residential space will enter the Island City by end of 2009-10.000/sq. Prabhadevi and Mahalaxmi are currently the largest source of land parcels for the residential developments in the micro-market.27 mn. Knight Frank research estimates that 8.000/sq.ft. Parel. employees in these organisations prefer affordable accommodation in the suburbs.ft. As compared to the South Mumbai and Central Mumbai.000-23. Vile Parle and Juhu have also gained prominence as residential hubs over the past few years. Casa Grande on Matulya Mills by Ashford Housing. capital values of projects in Wadala. This will further increase in the attractiveness of the micro-market of Western Suburbs. these locations are favoured by the upper middle income group.ft.000/sq.sq.14. Capital values of these projects range from Rs.13.6. with several corporate houses moving away from Central Business District of Nariman Point and Fort in South Mumbai to the SBD of Bandra-Kurla Complex and Andheri-Kurla Road. Currently. Prime residential layouts in western suburbs are locations like Bandra.000-12. Capital values for projects in these locations range from Rs. Khar and Santacruz.7.000-28. Towering residential complexes have sprung up on the erstwhile mill lands.

500 4. Keystone Group.Times Property Rs/sq.800-7000 4.000 16.000 4.000 13.ft 7.500-11.000/sq.500-6. Western Suburbs Bandra(E) Bandra(W) Khar(E) Khar(W) Santacruz(E) Santacruz(W) Vile Parle(E) Vile Parle(W) Andheri(E) Andheri(W) Jogeshwari Goregaon(E) Goregaon(W) Malad(E) Malad(W) Kandivili(E) Kandivli(W) Borivili(E) Borivili(W) Source. Malad and Kandivali. Capital values here are in the range of Rs.500 4. Mayfair Housing.000-17.4.500-18.000 12.500 4.500-7. Oberoi Constructions.000 5.000-12.000 9.000-6.500-7.000-6.500 4.500-6. Some of the large-scale complexes in the western suburbs include projects by Lokhandwala Constructions.ft.500 4.500 10.500 6.000-7.000-28.500 .500-7. and the demand here is higher for 2 BHK and 3 BHK apartments with varied amenities. Evershine Group. There has been a perceptible shift of interest of the middle income segment to these belts.000 7.000-18.000-11.500-9. Kalpataru developers and Ekta Supreme.000 6.000 4.residential complexes are mushrooming in the suburbs of Goregaon.000-8.000 7000-11.500-14. K Raheja.

750-7. stretching from Chembur to Mulund.500 3.ft. to gain popularity among the middle income group. By the year 2009-10. not withstanding the fact that property prices have gone up by almost 50% in 2006.56 mn. Notable among them are Kalpataru Group's 'Kalpataru Aura' at BOC India Ltd.500-9.000 LBS Road./sq. Eastern Express Highway and the construction of flyovers on this major artery has transformed these once unpromising neighbourhoods into favourable options of today. Central suburbs:Increased residential prices in the Island city have led to the Central suburbs.000 4.3.Times Property Rs. Most of the residential projects in these locations are highrise buildings offering acres of landscaped gardens and state-of-the-art amenities. stretching from Sion to Thane.000-6.500 4.500-7. accounting for almost 37% of the total supply.000 3. approximately 29.000-8.500/sq. Cental Suburbs Byculla Wadala Sion Kurla Powai Chembur Ghatkopar Bhandup Mulund Source.sq. Widening of the LBS Road.000 6.This micro-market has the highest quantum of residential projects in the pipeline.500-7. Runwal Capitaland's 'Orchard .000 5. also has numerous premium housing projects being developed on erstwhile industrial and factory lands. 8.500 4.500-11.500-9. of residential space is expected to be infused in the Western Suburbs.000 5. At present during reccession the residential capital values range between Rs. Powai and Chandivali continue to witness heightened activity and demand.ft.ft..750-9.750-6.

4.ft. is high especially in 2. with major residential developments coming along the Glady's Alwares Road. and the Eastern Express Highway. Current capital values for Grade-A apartments range from Rs. Neelkanth Heights. Lodha Paradise by Lodha Group.000/sq. Runwal Estate and Runwal Pearl by . Raheja Gardens by R.000/sq.Raheja. Siddachal.Residences' at John Wyeth Industry. new buildings are also being added on to some existing complexes like Great Eastern Gardens and Nirmal Galaxy. Besides.96 mn. There has been a steady growth of high-rises and self-sustaining townships in Thane leading it to emerge as a new residential location for the middle income group and upper middle income group. Thane:Thane has witnessed large-scale residential developments over the last few years. Property rates in thane range from Rs. Residential developments totaling to approximately 18.ft. are slated to enter this market by 2009-10.1 and 2. and Neelkanth Palms by Neelkanth Group. Thane will see an infusion of close to 7.000- Some of the prominent large-scale residential projects of Thane are Hiranandani Estate and Hiranandani Meadows by Hiranandani Constructions.5.000-6. 21/2 and 3 BHK apartments segment. Runwal Garden City.000/sq. of Grade-A residential space by 2009-10. The demand for residential spaces. Vasant Lawns by Sheth Developers. Ghodbunder Road.4. Neptune Group's 'Living Point' at GKW Estate and Runwal Group's 'Runwal Infinity' behind Ralliwolf.sq. According to Knight Frank Research. proximity to Mumbai and fast developing infrastructure. 6.000-8. Pokhran Road No. Capital values on the LBS Road range from Rs.ft.07 mn.ft. The key reasons for these are the availability of vast stretches of land due to shutting down/relocation of industries.sq. Kalpataru Hills and Tarangan by Kalpataru Group.ft.

Factors like the announcement of the new international airport at Kopra-Panvel area. Airoli Knowledge Park at Airoli and Thane Belapur Industrial Belt have invigorated the demand for residential apartments in this micro-market. broad roads. one of the first gated community of villas within the Mumbai city limits.Runwal Group. Navi Mumbai is a close competitor to Mumbai in every respect. Today.14 billion) is already in place with numerous flyovers. Millennium Business Park at Mahape.ft. SEZ coming up at Nhava Sheva and development of some of the major IT Parks like Dhirubhai Ambani. and parking lots. Thane also has Neelkanth Woods by Neelkanth Group. Navi Mumbai. 2.40. Airoli and Sanpada are also seeing substantial development.000-5. Basic infrastructure worth Rs. infrastructure development projects like the proposed Trans-harbour link and Mass Rapid Transit system will also help in easing the long commutes to the mainland of Mumbai. which stretches from Vashi to Belapur and runs parallel to the Thane creek. In addition. Nodes such as Koparkhairne. .500/sq.000 million (US$1. Navi Mumbai:Navi Mumbai is arguably the world's largest planned city. has fast emerged as an attractive option for residential buyers. Several high-rise buildings offering an unrestricted view of the Thane creek are under construction on the eastern side of the road. It was initially planned with a specific purpose: to decongest Mumbai and become an alternative haven for the multitudes that throng Mumbai from different parts of India. International Infotech Park at Vashi. Knowledge City (DAKC) at Kopar Khairane. the largest planned new city in the world. The residential capital values range from Rs. New residential developments are concentrated along the Palm Beach Marg.

availability of 1..000 3. The . Goodwill Developers.700 Major developments in this micro-market are by Kesar Group.000 2. These belts are emerging as popular residential destinations for the lower middle class and the middle class people.000 3. Relatively lesser-polluted environment.500-4.500/sq.500-5.000-4.800-2.000-5. The capital values which range between Rs.000 1.400-2.200 1. Prajapati Group.000-5.Navi Mumbai Vashi Airoli Koar Khairane Sanpada Nerul CBDBelapur Kharghar Kalamboli Panvel Source.000 3.000 3. Extended suburbs:With the prices in the suburbs on an upward trend.500 2. Haware Builders.200-4. of residential development will enter this micromarket by 2009-10. Regency Group etc. Around 5 lakh acres of developable land is largely available for which the flat prices hover between 1. to 2. the far-flung suburban belts of Kalyan and Dombivili on the north-eastern side and Mira Bhayander and Vasai-Virar on the north-western side and Panvel on the harbor route are increasingly gaining prominence.000-5.250-5. 2 and 3 BHK apartments at affordable prices.sq.200 sq ft. provision of ample open green spaces within the residential projects have acted as powerful 'pull' factors for the residential developments in this belt.ft. Arihant Universal.2.ft.06 mn. Close to 9. have registered a rise of 3040% in 2006.000 sq ft.ft 3.Times Property Rs/sq.

sq. rendering an option of owning independent duplexes/row houses for the working class.38 mn.200 1.200/sq. Extended Suburbs Mira Road Naigaon Vasai(E) Vasai(W) Virar Kalyan Dombivali Ambernath Source.800 1. Dombivili commanding higher prices than Vasai-Virar and Ambarnath. Lack of infrastructure in extended suburbs is the major reason for low prices of land here. Some of the prominent industry players in the extended suburbs are RNA Group.500 1.residential property rates currently range from Rs. Agarwal Builders.100-1. Akruti Developers and Mahadev Construction.ft.000-1.ft.200-1.800 1.500 1100-1. of residential space by 2009-10. Lifestyle group.ft.100-2. These extended suburbs are set to witness a supply of approximately 9. Evershine Group.600 These micro-markets also offer the advantage of comparatively lower land rates. For that reason.000 1. Mayfair Housing. Godrej Properties. with locations like Mira Bhayander and Kalyan.Times Property Rs/sq.400-2.800 1.800-2. Kanakia Constructions.1. 1. there can be no other good alternative for builders than looking forward to these areas.400-2.000-2. .

The lease rentals in Juhu and Lokhandwala are also under continuous upward pressure due to very limited supply and close proximity to excellent social infrastructure. A largely supply is coming from western suburbs like Goregaon. The increase in demand in the suburbs is due to availability of easy loans. the real estate investors are mainly HNFs`. Powai. Mumbai residential segment is performing very well in the current scenario. Availability of vast industrial land provides tremendous scope for planned development that includes quality housing with ample open space. The demand is very high in Bandra for sale and lease apartments but due to quick absorption of these apartments and limited construction activities the shift has been to the joining areas like Santacruz. Khar where newer constructions are coming up also there in these areas few pockets have witnessed noticeable capital appreciation. club house. Currently. Malad. Thane. . The demand for the quality residential leased apartments in south and south central Mumbai has increased significantly in past one year. security. airports. Mumbai is a mature. The investment is thriving with returns increasing manifolds over past few years. with limited supply in south Mumbai the shift has been towards North Mumbai. with the relaxation in FBI regulation. in last 9-12 months. institutional money is expected to be following into this sector. There has been an appreciation in real estate value due to increase in demand. Kandivli while Mulund.Mumbai Residential Market scenario:The Mumbai Real Estate is considered the yardstick for the burgeoning Real Estate sector in India. Vikhroli and Chembur belt from the central suburbs. demand led market where there are many more and users are compared to other speculative markets in the country.

Malad and Kandivli. the capital values have shown an increase of about 15-20010. they will be able to access Powai. Upper and luxury residential apartments are experiencing a strong demand by MNCs for their executives. As shown in the diagram the island city is divided in six segments. Widening of roads and western express highway will make commuting far comfortable for the residents living in these areas like Goregaon. The end user demand in the suburbs is expected to continue to be strong. Thane and other central suburbs more conveniently. In every segment demand will be as per the availability and demand. Rental and capital values in South Mumbai will move upwards due to the short supply. As many corporate houses have shifted to western suburbs. To sum of the residential market is on upward swing and prices trends will continue to be gently upward. Yields on residential property in Mumbai have been around 5-7%. middle and upper middle class have shifted to the these areas for the new developments offer better lifestyles to individuals. Supplies in suburbs have been absorbed due to a very high demand.etc. Thus property prices in these areas will see further 10-15% increase. Other segments also have distribution of new residential supply. Many developers are expected to announce new projects soon. Maximum demand is seen in western suburbs which is 36 percent. . Distribution of new residential supply by 2009-10 The new residential supply at the end of 2009 and in 2010 is as per the demand. availability. prices etc.

Chapter 6 RENTALS IN MUMBAI .

Since the scope for further development of residential facilities within the peripheral of the city is on the verge of its saturation point. The deficiency in supply of houses keeps on propelling the real estate prices to a new zenith every year. of course.000 houses annually. which reflects the price that market is willing to pay for the use of space. it is often required to deposit a lump sum as a security amount. Houses on rent in Mumbai have always been a matter of acute shortages owing to the huge gap between demand and supply. Rental of Residential space is a resultant of a complex interplay between various factors like demand & supply of residential real estate. proposed infrastructure development. As a result. According to a report. but the combined effort of private housing companies and government housing authorities yield only 55. existing infrastructure facilities. In order to rent a house. availability of land. without accrual of any interest. house rent in Mumbai is hitting the sky. This is not all. such as a flat or apartments in Mumbai. The ultimate value of Residential real estate emanates from its rental flow. which compels a majority of people to live under unhealthy atmosphere in cramped rooms or flats on a share basis. Even. the city needs 84. economic growth and many other factors. . builders and developers are coming up with their housing projects at the outskirts of the city paving way for the growth of Mumbai suburbs and satellite cities like Navi Mumbai .Rentals in Mumbai Residential Market Residential Real Estate represents a significant fraction of the investment universe. the growing trend of house rent in these areas ceases to bring any relief to home seekers.000 houses every year additionally.

RESIDENTIAL REALTY RATES IN MUMBAI:. 4-10 psft. 4-10 psft per month.ft SOUTH MUMBAI Cuff parade Marine lines Church gate Malabarhill/walkeshwar Worli Prabhadevi/parel CENTAL SUBURBS Wadala Sion Powai Chembur Ghatkopar Mulund Thane WESTERN SUBURBS Bandra-E Bandra-W 40-65 45-150 18-29 20-43 20-75 20-35 18-30 18-30 15-25 70-150 55-90 50-95 90-190 65-135 55-95 . Worli./sq. which command an average rental value to the tune of Rs. Santacruz and Khar are the most expensive areas in Mumbai to rent a flat or apartments.Posh localities. While it requires between Rs 8 to 16 psft per month to rent a flat in Worli or Santacruz. such as Bandra. the cost to rent home in Juhu or Andheri comes at a comparatively cheaper rate between Rs. LOCATION RENTAL VALUES/ Rs. Juhu.

Khar /Santacruz-E Khar /Santacruz-W Vile-Parle-E Juhu Andheri-E Andheri-W Goregaon-E Goregaon-W Malad-E Malad-W Kandivili-E Kandivili-W Borivali-E Borivali-W Mira Road-E Vasai-W NAVI MUMBAI Vashi Koper Khairane Nerul Belapur Kharghar Panvel Source: DNA NEWSPAPER. 12th June¶09 35-55 40-90 35-45 55-75 25-45 35-70 25-35 25-40 15-35 25-40 15-33 15-31 15-29 18-31 9-12 7-9 13-21 12-19 12-19 10-18 9-16 8-10 .

e. are considered safe and can be availed of on an individual or sharing basis mean big business. penthouses and condominiums are gaining ground as a popular choice. luxury apartments and home. . A paying guest or PG accommodation in Mumbai is a convenient accommodation arrangement where the owner provides meal as a part of the rent agreement. the terrace flats. as they ensure good rentals on a regular basis In the high-end rental apartment segment. This has created a good market for those seeking to invest in Investment property i. bungalows. apart from several desirable amenities like laundry. Mumbai have far greater avenues for those who are on transferable job or looking for job opportunities. Even PG hostels and working women¶s hostel. investing in a property for rental purposes.Rental Trends:- Residential rentals for flat/apartment. Increased demand of independent houses or paying guests in Mumbai where the corporate sectors rent independent houses for their senior executives. villas. independent house and PG accommodation are more popular Mumbai. The segment is also considered a safe investment option as the leased property is kept under the inspection of the respective housing society.

Chapter 7 FACTORS AFFECTING REAL ESTATE PRICES .

Distance to shopping. Real estate almost contributes about 6 percent to gross domestic product (GDP). soils. hydrology. crime and many more are the factors which affect the real estate prices. . supply and many more plays a vital role in Real Estate Sector. maintenance services and many other benefits will lead to demand and increase in the prices of property. land availability. car parking space. Good amenities lead to higher prices and more demand. Neighborhood factors: age of surrounding housing stock. demand. Slopes. Places with better infrastructure like rail and road connectivity and basic amenities like hospitals and schools. schools. restaurants and shopping.Location is one of the most important factors affecting real estate prices. parks). Infrastructure: -Infrastructure is always a major driver for price growth. golf. Availability of amenities (water. Distance to employment sources. Properties in such places affect real estate prices in positive sense.FACTORS AFFECTING REAL ESTATE PRICES Real estate is the second important source which generates economy in our country. Therefore the property prices. Location. Availability of social infrastructure in the location will affect the demand.

prices increase and vice-versa. residents often realize they can have a better lifestyle elsewhere. The other driver is availability of land.Population change is the key driver of demand. Demand & Supply. interest rates and wages reach a ceiling in a particular area.Sentiments: Positive sentiments in the market and economy will lead to better demand. . interest rates and wages. It's the cost to the owner or investor to retain and enjoy a property. When prices. Affordability and availability of money- Affordability is the relationship between housing prices. People when confident about a sustainable source of income will be more comfortable in making property buying decisions. When an area becomes popular more people want to live there. Given there are fewer dwellings than interested parties.

And with an increase in their salary scale. When interest rates increase. Less demand leads to fall in prices of realty. or maybe an investment property or two.Inflation is a rise in the general level of prices of goods and services in an economy. (Low interest rates = higher prices. INFLATION LOW DEMAND FALL IN PRICES Interest rates. As the prices of goods increase the whole money management of people is affected. these workers seek to improve their lifestyle by buying bigger and better homes. high interest rates = lower prices). real estate and banking are perhaps the most directly impacted.The resources boom-The demand for skilled and unskilled workers is increasing day by day. Inflation.An interest rate is the cost of borrowing money. Among the many industries affected by fluctuations in interest rates. Low interest rates High interest rates = = Higher prices Lower prices . borrowing becomes more expensive. dampening consumer demand for mortgages and other loan products and negatively affecting residential real estate prices. This affects the demand in real estate.

. If people do not have money and bankers do not have money to give loan then it¶s directly going to affect the real estate prices. Legal frame work. Same is with demographic factor also. Recession is nothing but the economic slowdown. lower income group and middle income group. Greater young population will create more demand and will also bring increase in price level of property vice-versa. As it is common principle of real estate low demand then fall in prices and high demand then increase in prices of property Demographic factors. Buyers are not ready to pay much amount after going through legal framework.e. less investments.higher income group.Recession is the most important factor affecting the real estate prices. It is a tense mood having features like downsizing. he will have to reduce the prices of huge property. Changing age profiles also affect the prices. If he tries to sell a high priced property to lower income group then it is definitely going to affect the prices in negative sense i. deductions in salaries. insolvency etc. unemployment. A seller should divide the market into three.Legal frame work is also an important factor affecting real estate prices.Recession.One cannot sell an Ipod to deaf and a television to blind. The registration and documentation of real estate is complex and costly.

This result in unnecessary delay in the work and the cost of wasting time would actually be more than the increase in price. The distribution of national income.Fluctuations in prices of inputs.Input includes the raw material used for construction. Many builders tend to stop work when the prices of inputs like cement.Economic factor is nothing but the national income of the salaried persons. iron etc goes up so as to wait for the time when they expect the prices will come down. . per capita income directly affects the purchasing ability of individual and the employment is closely related with the housing development. Economic Factor.

Chapter 8 MUMBAI PROPERTY BOOM .

Worli and Bandra areas. Presence of various MNCs in the city. Soaring real estate rates so perfect for investment requirements. Within short time. Owing to the following factors.80%. Residential values were on the rise in the premium South Mumbai properties. This gave rise to increase in population in every decade.MUMBAI PROPERTY BOOM The Real Estate Market had an upward trend and had triggered the increase in the value of residential properties. the prices of residential properties started increasing at the phenomenal 50 . investors started coming in the Mumbai market. though the premium segment which has limited supply continues to attract buyers. Most of the real estate activity in Mumbai has been in the middle to upper middle class segments. There has been some appreciation in the values of prime properties in South Mumbai. Large number of developers. Conversion of mill area into residential complexes. the residents aspire to hold residential property in Mumbai y People in foreign trade via ships / ports wish to own a place in Mumbai. This results in availability of larger floor plates at much lesser rates. OVERVIEW: Mumbai is place were many people come to meet there dreams. Sound connectivity at both domestic and international level. Demand continued . There was an unprecedented real estate boom in Mumbai. y y y y y Various educational institutions of international repute.

Union budget has facilitated companies if they choose to buy land for providing houses for their employees. Relocation of the American School to suburbs has led to many expatriate officials also relocating their residences to the suburbs.000) categories. 8000-12000 psf. Most large projects have school. leading to a fall in rentals. Cuffe Parade Rs. Samir Bhojwani. on a regular basis. developers went in for integrated developments. Supply of residential properties in the leave and license market has built up. Raheja Constructions. Mindspace and Hiranandani. Central Mumbai a fast developing industrial market is not lagging behind and rise in commercial properties in on the cards with 30% .40% above market values. 20-30 million range. Residential categories all across the city were active. As a result. This includes two towers of 60 stories each known as "S D Towers". kept coming up with new developments. Developers were tying in with companies and vice versa for purchase of land for office space constructions. K Raheja Corp. subjective to their requirements. 15000-17000 psf. µA¶ Grade Buildings in the µGolden triangle¶ as it is coined. All areas are seeing a rise in values. 8000-13000 psf. the suburban move by corporates has given a boost to residential developments. The North Western and Eastern suburbs continued to be the preferred corporate locations in Mumbai. The realizations that land is an asset. Residential properties were on the rise in the region of Rs. K. Bandra one of the posh areas in Mumbai calls for Rs. Nariman Point and Bandra-Kurla Complex command a good price for commercial property. With residential projects going in tandem.40051. 7000 to 9000 psf. Tata Housing. college. corporations were contemplating on developing large tracts of green land. K Raheja Developers. GESCO. hospitals etc incorporated as an integral part of the project. Nariman Point commands Rs. command a price from Rs. 8000 ± 12000 psf and Bandra-Kurla Complex Rs. The residential markets have seen continued activity in the middle-class segment in Rs1-2. Mahindra & Mahindra. Kalpataru and Godrej Housing are the .5 million (US$ 20.and there were some new projects coming up in South Mumbai.

Navi Mumbai market was witnessing a marginal increase in residential segment due to large off take of residential apartments by Reliance Industries. People come from different places to achieve there dreams. This has increased density of population. the density of population in the city is around 45. Central Mumbai areas such as Wadala (what were they earlier) Sion etc started coming up as preferred residential areas. bollywood. Migration of people in Mumbai is due to several reasons like for work. Reasons for Rise in Real Estate The following are the reasons for rise in Real Estate Market all over Mumbai in Residential Market:- Migration of people:Mumbai is dream city. 662 persons per square kilometres. The following graph shows the density of population from 1981 to 2001 census:- . which have led many people coming to Mumbai. business. jobs and studies etc. Currently.leading developers active in residential market.

increase in demand lead to rise in prices of properties of Mumbai. offices etc. venturing into Mumbai city. MNC¶s. Employment opportunities also generated income to employees. More demand for property lead to increase in prices. Mumbai is the commercial and entertainment centre of India. 40% of maritime trade. there is approximately similar population in island city but in suburbs and outer city there was continues increase in population of people. Mumbai is home to important financial institutions such as the Reserve Bank of India. Foreign Direct Investment:The government of India provided fresh impetus to the construction and development sector by allowing 100% foreign direct investment (FDI) under the µautomatic route¶ in order to spur investment in the vital Real Estate Sector.According to the graph. employment opportunities as well as its potential to offer a higher standard of living. It is analyzed that the Mumbai population is going to be double in 2011 census. Large inflows of foreign funds created easy credit conditions for a number of years prior to the . Financial Hub:Mumbai is said financial capital of India. This generated more demand for houses in Mumbai. generating 5% of India's GDP. and 70% of capital transactions to India's economy. known as Bollywood. attract migrants from all over India. Hence. Many people started getting jobs with high salary. The city also houses India's Hindi film and television industry. the National Stock Exchange of India and the corporate headquarters of many Indian companies and numerous multinational corporations. This resulted in increase in demand for real estate in Mumbai. This also gave rise to prices of properties in Mumbai. the Bombay Stock Exchange. People from different places started settling down in Mumbai for the purpose of earning. and accounting for 25% of industrial output. Employment Opportunity:There was employment opportunity generated all over Mumbai because of many financial centres. Mumbai's business opportunities.

the real estate share in them was around 16%.5% was committed to real estate sector. .2% in 2004.5%. which drove prices higher. while total FDIs in India were estimated at US$ 5. nevertheless projects that in 2006-07.6%. In 2004-05 this increased to US$ 3. However. Indian Real Estate was on the high growth path In 2003-04. large residential townships were constructed in suburban areas.Virar and many more. Shortage of supply: As many people migrated in Mumbai and 100% FDI by government of India. The unused land prices went up in these areas also.46 billion. Subprime lending was a major contributor to this increase in home ownership rates and in the overall demand for housing. India received total FDI inflow of US$ 2. This created demand and thus property prices went up. The congestion of main Mumbai City turned people to the suburbs to meet their residential requirements.crisis.70 billion. There was shortage of supply of land which gave rise to extended suburbs like Bhayander. Dombivli Vasai. Kalyan. The USA home ownership rate increased from 64% in 1994 (about where it had been since 1980) to an all-time high of 69. fueling a housing market boom and encouraging debt-financed consumption. in 2005-06. With focus on township. The Study. Suburbs started improving. total FDIs will touch about US$ 8 billion in which the real estate share is estimated to be about 26. Many developers came into the market with different projects and buyers migrated in this city. of which only 4. the real estate shares was 10.75 billion of which.

Punjab National Bank. The only thing they wanted was good house. As there was easy availability of home loan many customers started taking home loans. rapid urbanization. ICICI. the interest rate provided by bank was 12. As shown in the graph. The rate of interest was also low during the boom period and also the customers were given the advantage of paying the installments on monthly basis. According to Kotak Institutional Equities estimates the interest rates offered by banks on home loans were decreasing as there was rise in property prices in Mumbai. special offers and attractive schemes by builders to attract end users and Favorable demographic parameters etc. Janta bank and many more started giving home loans to its customer with various schemes. Thus.8% 2001 then in 2003 it was even below that is 10. these all also created rise in property prices in Mumbai.4 percent and in 2005 it was 8. Other reasons: . This increased the business of banks as well as benefited the customers.This lead to `individual¶s willingness to pay high for the properties. Robust and sustained macro economic growth. thus property prices went up. infrastructure support & development by government. fiscal incentives to developers.Closure of textile mills and industrial sheds. redemption in taxes by investing in real estate. amenities etc.0 percent Higher Standard Of Living: . high quality lifestyle.Easy Availability of Loan: With day-by-day property prices increasing all banks Private banks and Public Banks)like HDFC. good infrastructural facilities. . leading to rise in Real Estate market all over in Mumbai. redevelopment of slum areas. SBI. IDBI.

shopping complexes and schools. As the price increases. they sell off the first one.Complexes modelled on resorts.TRENDS IN MUMBAI DURING RISE:The demand for plots of land went up with the boom in industries. But when there is a genuine demand. When every builder began to offer these. real estate in Mumbai had reached crazy levels of prices. New apartments¶ complexes have recreation facilities. Not content with differentiation. While this is a good thing. The buyers yearned a lifestyle equivalent to the lifestyles abroad. Some buyers also started taking advantage of the sprialling prices (driven by the builders to a great extent) to book say. and then the second effectively getting their third (and the one which they intend to own) apartment nearly free of cost. European looks. A significant percentage of the buyers are genuine (not speculators) buyers who intend to stay in the apartment they book. vast open areas. and they had the capacity to pay. speculators can¶t keep off. power back up. basement parking. 3 apartments when they want just 1. security. good lawns and even swimming pools. apartments soon came into favour. This reduced the "matchbox" apartments on offering and has spawned a host of self sufficient complexes. a tax incentive on home loans and the general growth mode of the economy are other factors driving the real estate boom. . the bigger ones began to offer multiplexes. But with the cost of a 30X40 ft plot plus home going for the equivalent of 5 million rupees in a good residential area. it was the snob value (at a premium) . all of which are very difficult to get when one goes in for an individual plot. Soft interest rates on home loans. pools lined with Italian marble were the latest fad these days. in the recent past.

Chapter 9 IMPACT OF RECESSION ON REAL ESTATE MARKET .

and securities backed with subprime mortgages. mortgage delinquencies soared. with major adverse consequences for banks and financial markets around the globe. defined as those with lesser ability to repay the loan based on various criteria. . When USA house prices began to decline in 2006-07. became apparent in 2007 and has exposed pervasive weaknesses in financial industry regulation and the global financial system. widely held by financial firms. Many USA mortgages issued in recent years were made to subprime borrowers. lost most of their value. which has its roots in the closing years of the 20th century.´ US Subprime The crises subprime mortgage crisis is an ongoing financial crisis triggered by a dramatic rise in mortgage delinquencies and foreclosures in the United States.IMPACT OF RECESSION ON REAL ESTATE MARKET After seeing a continuous rise in demand and prices for the last few years in the residential market the market is facing a sudden downturn. The crisis. All the markets have bearished. This all is just because of ³US subprime crises.

home prices failed to go up as anticipated. refinancing became more difficult. However.The result has been a large decline in the capital of many banks and USA government sponsored enterprises. Further.3 million U. Foreclosures accelerated in the United States in late 2006 and triggered a global financial crisis through 2007 and 2008. an increase in loan incentives such as easy initial terms and a long-term trend of rising housing prices had encouraged borrowers to assume difficult mortgages in the belief they would be able to quickly refinance at more favorable terms. During 2007.S.S. tightening credit around the world. once interest rates began to rise and housing prices started to drop moderately in 2006±2007 in many parts of the U.. The crisis began with the bursting of the United States housing bubble and high default rates on "subprime" and adjustable rate mortgages (ARM). up 79% from 2006. Government policies and competitive pressures for several years prior to the crisis encouraged higher risk lending practices. and ARM interest rates reset higher. Defaults and foreclosure activity increased dramatically as easy initial terms expired. housing properties were subject to foreclosure activity. nearly 1. beginning in approximately 2005±2006. .

Subprime Mortgage crises .

Impact of Recession on Indian market:A recession is when GDP growth slows, businesses stop expanding, employment falls, unemployment rises, and housing prices decline. Due to subprime crises there was a recession all over world. A recession had far-reaching impact on whole world. The US subprime crises also affected India as there were many foreign investors like Lehman brothers, Bear Sterns, Merrill Lynch, AIG etc. These investors or lenders almost become bankrupt. Thus leading to fall in property prices in India. REAL ESTATE industry is taking on correction period all over India. Brokers, especially, seem to be convinced that the market is set to fall. In many areas, the property rates have already started falling. Accordingly in Mumbai, Goregaon, Malad, Mira Road, Vasai and Virar on western suburbs and Mulund, Bhandup, Kurla, Chembur and Govandi on central side have started stagnating the level of property prices. Pune, Nashik, Noida, Jaipur, Bangalore, Chennai and Hyderabad are also feeling the cold wave in the property market. Reason for the same is related with hike in housing finance interest rates and unaffordable property rates. Investors are, now, not buying any property and have stopped going in for more investments. Practically, when no one buys, rates are stagnated at some particular point. That is what is happening today. The sale price has stopped further climbing up, since there are no takers. Malls are worst hit. The recession started with them, while the exhibiting rates were much less then the actual investments made. It may be a recess. For the time being, investors want the market to show its true colour. And after they sell off certain non moving stock, buying spree may start again afresh. It is also linked with the liquidity crunch in the economy and falling stock exchanges in the country. A lobby of investors does not want share market money to go easily from the real estate market. People, who have invested in real estate from earning of share market, want an exit to pay off the liabilities created by them in the share market. Players in real estate market want the rates to stop climbing up for some time, so that they can capitalize on such panic sale. Big game plan is on the hands of few groups of individuals and few finance companies that have entered recently in the trade.

A slowdown in the construction sector potentially has large knock-on effects on the economy as the sector directly accounts for 7.3% of GDP, its backward linkages in terms of the sector¶s usage of iron, steel, cement etc., and forward linkages to other sectors, impacts an estimated 14% of GDP. Realty companies that had raised funds through the capital markets and private equity funds suddenly started finding themselves in a soup. Funding options began to dry up. Asset values fell. Stock markets took on a bear run. Stock valuations of realty companies plunged and inflation reached alarming proportions. The RBI raised key rates to curtail money inflow in the system. Builders, today, have started to reduce the price everywhere in the country. Ready stock is still not available, as the builders have already sold 30 to 50 per cent of their stock, during under construction phase, to investors. As the investors want handsome returns on the finished stock, while they do not sale in the open market, but through the builder only. That stock again is sold by the builders to the actual buyers by mounting another profit margin. Hence, when the actual user buys the property, he has to pay investor¶s hidden margins, which change hands five times during the time of construction. The fall in collateral will also hurt firms¶ balance sheets, increase their funding costs, hurt confidence, and reduce investment demand. However, the impact on demand will be lower than in developed countries. Banks hiked consumer loan rates as also home loan rates. Corporate waking up to pressure on expenditure began to announce lay offs, salary cuts and many such cost cutting measures. Cautious consumers battling multiple whammies began to put off home buying decisions. Demand has since stagnated and fallen drastically.

Chapter 10 A PICTURE OF FALL IN PROPERTY PRICES IN MUMBAI AFTER THE CRISES

To resolve or to overcome such problems various things were noticed in real Estate market Of Mumbai such as discounts. The Real Estate Market of Mumbai has fell down almost 25-35 percent in 2008 as compared to years of rise in Mumbai. which in recent years witnessed an astronomical price increase bringing it in the league of the worlds most expensive cites.Mumbai Property Bubble Mumbai¶s realty market. increasing interest rates. this is the first time figures prove the extent of the slowdown. There could be more of a downswing in real estate investments as people are backing off from the sector in large numbers. . the first time in six years. From April 2007 to March 2008. Analysts said this could be just the tip of the iceberg as stamp duty registration figures indicate the trend only among genuine homebuyers. 62.595 flats were purchased in Mumbai as against 74. Information about residential property sales from the stamp duty registration office show almost 12. offers. Though the property market in the country¶s financial capital has been rife with talk of a slump for some time now.000 fewer transactions during the last financial year compared to the year before. is finally taking a beating. developers reducing property prices and many more. Property sales that have been growing at a clip of about 20% every year have plummeted by 17% in 2007-08. unaffordability.555 in 2006-07.

etc. providing free parking area and waiving of floor rise charges.000sf per unit to 2. offering amenities.5BHK and 3BHK earlier at Runwal Estates located at Ghodbunder Road. Thane. such discounts were not publicly reported and were available only to large investors. several large reputed developers .5BHK and 2BHK apartments v/s 2.Drop In Residential Prices Across Key Mumbai Micro Markets (%) Reducing the size of flats: Developers are reducing the average flat sizes to make them more affordable. Mumbai (2) Runwal group is now constructing 1. In the last two months. For instance (1) Orbit Corp has reduced its flat sizes from 4. Until recently. These sops and discounts include waiving of registration. Various measures being adopted by developers to boost sales Offering various sops and discounts: Most developers are offering sops and discounts in various guises often on a case-by-case basis to push transactions.500sf to 5.700sf/unit at Orbit Haven located at Napeansea road.500sf to 2.

and on the buyers side. weak end-demand and aggressive product launches by large pan India players is forcing the incumbent real estate developers to give in. and (2) antagonize existing investors/buyers in the project (leading to cancellations or uncertainty regarding cash flows from pre-sales). hoping to stimulate demand and lower inventory. developers are giving different offers and discounts to home buyers. They fear that price reductions in a particular project could (1) have a ripple effect on their other projects within the city. Job insecurity and low business confidence have become key concerns prompting buyers to postpone big ticket purchases. Incumbents in the residential vertical are at a disadvantage. Tug Of war between developers and homebuyers:It is said that there is tug of war between developers and home buyers. To increase the demand for property and to make sales. Tight liquidity. with varying sales levels. . Developers are already committed to several projects. Buyers who have been priced out of the market are playing the waiting game.have issued public advertisements about discounts. This has occurred because of recession. hoping that developers would lower list prices.

Innovative deals: Even large organized developers are offering innovative financing deals to stimulate sales. Ansal Properties and Prasvnath amongst many others have resorted to unique funding schemes for their customers. INNOVATE DEALS MADE BY COMPANIES TO INCREAS SALES:- . For instance. Mumbai-based Cosmos Group started a new trend by launching its µGhar pe ek ghar free¶ offer (one house free on every house) at Thane. The customers are required to pay only the booking amount while payment towards EMI would commence only from the date of possession of their property (developers bear the EMI cost on behalf of the customers until possession is handed over to them). Further. free international holidays and free car with every purchase. Unitech. free parking. several developers have resorted to offering freebies including fully furnished houses.

.

0 -20.000 7. DEVELOPER PROJECT LOCATION BASE RATE(RS/SF) CURRENT RATE(RS/SF) PRICE CHANGE (%) Akruti City Akruti Greenwoods Thane 4.000 3.750 2. Several other developers have not lowered list prices.7 -20.500 5.100 3.800 -7. Ekta Shelters.800 4.250 3. Mantri Realty.300 4. as they believe that this may not necessarily result in any incremental demand.175 3.800 5.300 -18. Rashmi Housing.0 -4. have little meaning.0 -20. Several major developers including Orbit Corporation.200 4.Motilal Oswal .0 Source: .600 -25.900 4.500 5.9 -4.9 Rashmi Housing Runwal Group Kanakia Haware Royal Palms Rashmi Garden Runwal Estate Niharika Tulsi Plam Island II Garden View Green Park Virar. List prices quoted by developers for under construction projects or newly launched projects. Invariably.250 2.3 Neelkanth Group Neelkanth Greens Thane (W) 5. Thane Thane Thane (W) New Panvel Goregaon Goregaon Kahndeshwar. officially. and Royal Palms have already lowered their list prices. Navi Mumbai 2.Developers giving discounts:Developers have been forced to cut prices for new and under-construction projects by 30-45%.0 -28. deals are happening at 30-50% discount to list prices. however.800 2.

Affordable house prices with increasing Interest rates Affordable house prices with increasing Interest rates (Above Rs. Thus.Housing µun¶ affordability in Mumbai (increasing interest rates) The last 3 years have seen tightening of interest rates by reserve bank of India (RBI) through its monetary policy. This is seen after taking into account the rise in tenure and LTV by most housing finance companies . affordable house prices at the same income level have fallen. 900. which has resulted interest rates rising by over 300 basic points.000 income) Equated monthly Installments (EMI) have increased with increasing interest rates.

Chapter 11 VISIT REPORT .

With property prices down by 25-35% volumes have certainly picked up in the last two months. For real estate companies. There was a consensus that in the last 2 months volumes have improved due to new project launches at competitive prices. majority were concentrated in the suburban Mumbai especially Andheri and beyond (in western suburbs) and Mulund and beyond in the (eastern suburbs). this time around I witnessed developers offering apartments at 25-35% lower prices than the peak price. DLF. we believe investors will focus on the interest servicing capabilities of the companies. I believe this could be called a trend reversal (in terms of volumes and not pricing) if such encouraging volumes continue for the next few quarters as well. With loan restructuring for most of the companies now over. However. The exhibition had over 1200 properties on display from more than 80 developers showcasing their products.Visit to the MCHI Property Exhibition On 13th April. I also interacted with few brokers and developers on the recent launches in the residential segment and the response from the buyers. Amongst the listed space. . few developers were offering at price points which were 25% lower than the peak prices. In the commercial office space as well. largely in the residential space. launching projects at attractive price points can be the only savior during these times. ³free car with purchase of 2BHK´ and ³5% discount´. Unitech and HDIL have launched residential projects at competitive prices in the last two months. few developers were also selling residential apartments at ~30% lower than the peak prices which were nearing completion. Amongst the new launches. 2009 I visited the property exhibition at Mumbai organized by Maharastra Chamber of Housing Industry (MCHI). More interestingly. Unlike the property exhibition in October ¶08 when the developers were offering schemes like ³no stamp duty´.

This time around discount offered were actually in terms of reduction in the property rates. Apartments nearing completion also available at lower prices Interestingly. developers were also offering apartments at significantly lower prices even for properties which were completed or nearing completion. ³free car with flat´.Better response than the one in October 2008 Developers witness the response to the exhibition better than the one in October 2008 because in October they were reluctant to reduce the prices and were only offering schemes like ³no stamp duty´. . ready to move in apartments were available at 25-35% lower then the peak prices. ³and discount of 5%´. With lower prices and better visibility in the ready to move category we expect good demand to emerge in this segment. This phenomenon highlights the unsold inventory that the developers might be carrying due to poor sales in the last one year. Depending on the location and the developer. Few properties are also available between 25-35% of the peak property prices.

One of the largest Civil Contracting firms in the Middle East. Founder Chairman.Thane . Biomass Power Plant. Infrastructure. The Group's driving force however remains its flagship company . Kalpataru Ltd. Palace of The Ruler of Sharjah. Sharjah Stadium. Upcoming Projects Kalpataru Pinnacle- Malad (W) (W) Colour Chem. Property Management. Logistics and Warehousing. townships. Oil and Gas Pipeline. 1000 Villas. Kalpataru Group have today diversified into different industry verticals. tourist convention centre and SEZ. Power Transmission Towers. employing well over 6.Established 1969 by Mr. with wide range of projects including residential.000 people. the Kalpataru Group sets the benchmark by which others strive for success. retail. religious establishments and many educational projects like Hotel Holiday Inn. Telecom Infrastructure. It is one of the first companies to be ISO 9001 certified since 1997. Hospital in Dubai and the Defence establishments.Kalpataru Ltd. and Office Supplies. hospitality. commercial. Rural Electrification. A leader in the real estate and property development industry. was based in UAE during the period of 1974 and 1982. commercials. International Trading. Kalpataru brings truly world class standards into its developments. The company proudly completed various successful projects including residential properties. Mofatraj Munot. With interests in wide range of areas that include Real Estate and Property Development.

The company is .Andheri (W) Kalpataru Gardens II.Kandivali (W) Kalpataru Riverside.Mira Road During my visit to Kalpataru Synergy. He helped me to know about there Residential properties in Mumbai. Santacruz I had a talk with Mr.Kandivali (W) Kalpataru Towers.Current Projects Kalpataru Aura. Sachin Agrawal. Project Finance Evaluation Manager. prices of properties and actual Rise and Fall in there properties.Thane (W) Siddhachal VI.Thane (W) Kamdhenu.Panvel Kalpataru Hills.Thane (W) Siddhachal VIII. It is involved in all kinds of real estate projects. Jaipur.. Nagpur and many more. Hydrebad.Ghatkopar (W) Kalpataru Estate.Mulund (E) Srishti. Here is a short summary of the conversation which I had with him during the visit:- Kalpataru has its projects all over the country like Mumbai.

More and more marketing of properties had to be carried out. The property prices of Kalpataru have witnessed a boom in the last decade. New offers. The demand. It has completed lot of projects in South Mumbai and Mumbai Suburbs. according to availability and requirement. Therefore property prices have to be reduces. were given. supply. New strategies were also implemented to increase the sales. discounts etc. . amenities etc. Kalpataru is company which has made its image in the minds of people through many decades. Thus India will have very bright future in this sector in this coming years.present in luxury segment of residence. The rates started falling from 15 to 20 percent in Mumbai properties of Kalpataru. Sales started declining. The company has its projects in all the micro markets of Mumbai. prices. of kalpaturu varies from one place to another. They feel that property prices will now slowly stabilize and demand will also recover and developers will start focusing on affordability housing to extend further into suburbs. But the crisis which has taken places has had far reaching affect on this company also. The government will also lay down favorable polices.

Kharghar Regency Towers. Vashi-2005 & 2006 o Best Designed stall in MCHI Property Exhibition. Regency groups¶ commitment to excellence.Navi Mumbai COMPLETED Regency Garden. The landscape is beautiful with spacious Houses.2008 Regency Towers Regency Towers is one of the popular Residential Developments in Thane West neighbourhood of Mumbai. luxury and amenities. It is among the well known Projects of Regency Group. It has its properties in Mumbai:- ONGOING Regency Estate. Vashi. Regency Group has received innumerable fame and respect in the discipline of realty development.Regency Group is synonymous for proving right blend of beautiful environment. Thane.2008 o Best Designed stall in BANM Property Exhibition.Thane Regency RoselandTalegaon Achievements o An ISO 9001-2000 certification NQAQSR o Best Designed and Informative stall in NMBA Property Exhibition. Thane.Dombivili UPCOMING Regency Flora.2007 o Best Informative stall in MCHI Property Exhibition. attention to detail and personalized support has shown an unmatched vertical growth alongside a strong and loyal customer base. Recognized for all-inclusive excellence and incomparable levels of architectural designs. .

Regency Specification: 3 Towers of Podium/ stilt + 22 storey  2 & 3 BHK Luxurious and spacious flats  Landscape garden with jogging tracks  State-of-the-art Clubhouse  Podium parking  Luxurious Amenities  A shopping Plaza  Rain Water Harvesting  Solar Systems  STP Plant Regency Credits 1. Architect: Archetype Consultants (I) Pvt. Arunkumar 8. 3. Plumbing Consultants: Sheetal Environs (India) Pvt. STP & Rainwear consultant: Mungekar & Associates 10. Ltd. Legal Advisor: Adv. Interior Designer: Deepak Narwani . Landscape consultants: Arun Kumar Landscape Architects Pvt. Ltd. Electric Consultants: Bahulekar and Associates 4. B. Concrete Designer: Structural Designers & Consultants Pvt.S. 2.Sukthanker & Associates 6. Vaastu Consultant: Dr. Ltd. 9. Ltd. RCC Consultants: B. Kulkarni 5. Vishaw M. 7.

1.reaching impact of Recession. The sale is average. .000 and club charges. Car parkingRs. Dombivili and Thane. Here is a short summary of the conversation which I had with him during the visit:Regency group has its projects in Vashi.ft.During my visit to Regency Towers.25. There is neither so much of fall nor rise in Property Prices. Kharghar.Rs. Floor rise Rs. The south Mumbai Property of Regency Group has seen a maximum drop in property prices amongst all the other properties.000 for 3BHK. 100. This step should be undertaken to revive the real estate demand.000 for 2 BHK and Rs. During rise Current Price 4500 3800 Regency Group is not using any type of marketing strategy during fall they have only revised the property prices. They do not start the booking unless and until 90 percent of construction is completed. Regency group has witnessed maximum sale during Rise. More and more bookings. It has luxurious segment of Residential.per sq. Regency group did not have a far. He helped me to know about the actual Rise and Fall in there properties. It deals in all types of Real Estate Projects but mostly it is involved in Residential Market.Sales Executive of Regency Towers. The rates are standstill. Vijay Sarode. from first floor. According to Mr. 30/. Vijay to increase the demand and capture the market the developers should stop the new projects and concentrate on already available projects then there will be demand.300. Thane I had a talk to Mr.

Mumbai will be the first to benefit. and also attraction of huge amount of foreign direct investment and wealth creations. Rise in prices due to more and more migration of people for employment. There will be no end to Real Estate Growth in this country . Then sudden downturn in property prices because of US subprime crises leading to fall in property prices allover Mumbai. But now as the economy tries to get on its fest and the global financial market recovers.Conclusion Mumbai due to its diversity and opportunity will always remain the hub of India economic march ahead. Mumbai property market has witnessed a huge roller coaster ride in the last decade. India will have very bright future ahead in Real Estate as the growth of population is tremendous and there will be need for more and more housing. Its inherent strength leads us to believe that recovery is not very far. studies. etc. Favorable government policies and such overwhelming demand have seen the property prices touch the roof. business.

Nirmal Lifestyles and Kalpataru ltd o MCHI Property Expo.BIBLIOGRAPHY 1) Newspapers: o Property Times o DNA Newspaper 2) Magazines: o Business World o India Today 3) Others: o Brouchers ± Regency Towers.13th April.. 2009 .

com .com o www.WIBLIOGRAPHY o www.realestatemumbai.knightfrankresearch.com o www.centrumresearch.recession.mchi.com o www.com o www.google.org o www.

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Kitchen Equal Monthly Installments Maharastra Chamber of Housing Industry .Abbreviations Abstract FSI DCR MCGM MMRDA Full Forms Floor Space Index Development Control Regulations Municipal Corporation of Greater Mumbai Mumbai Metropolitan Region Development Authority CRZ MUTP MUIP GOM CBD MNC PG BSE NSE GDP FDI ARM US RBI BHK EMI MCHI Coastal Regulation Zone Mumbai Urban Transport Project Mumbai Urban Infrastructure Project Government of Maharashtra Commercial business district Multi National Corporation Paying Guest Bombay Stock Exchange National Stock Exchange Gross Domestic Product Foreign Direct Investment Adjustable Rate Mortgages United States Reserve Bank Of India Bedroom. Hall.

Questionnaire 1) Name 2) Years of Experience in this industry 3) Currently working with which organization? 4) In which cities does your company have projects? 5) Is your company involved in constructing all kinds of real estate projects? Residential Commercial Retail Hospitality All of these 6) What segment of Residential is your company present? Affordable Mid Market Luxury 7) How has the recession affected your company? .

if any? 9) What kind of marketing strategies your company is adopting during recession period? 10) What is your future outlook on the real estate market? Short term and long term 11) What are the projects that your company is undertaking? 12) According to you what steps need to be undertaken to revive the real estate demand? THANKING YOU! .8) What kind of fall in property prices have you witnessed in your projects.

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