Those expecting a correction in the real estate market will unfortunately have to shell out more during Diwali.
There is both good and bad news for real estate buyers. Those expecting a correction in the real estate market will unfortunately have to shell out more during Diwali. But the good news is that real estate prices in central Mumbai may slip further because of oversupply and confused government policies.
BKC rules the realty roost
According to Jones Lang LaSalle, Bandra (East) and Bandra-Kurla Complex (BKC) is generating considerable interest among buyers and investors. BKC has seen over 3 million sq ft of office space absorption over the past one year. There is an immediate demand of an additional 4 million sq ft of Grade A office space, which will also result in an increased demand for residential properties.
With business sectors such as banking and financial institutions, diamond trade, insurance, and the sales and marketing operations of IT companies growing dramatically in the western suburbs, BKC is poised to become India’s most expensive and sought-after location. Consequently, those in senior managerial positions, as well as tier 2 and 3 employees are giving priority to the western suburbs for accommodation because of the proximity of BKC.
“It indicates that residential properties in Bandra (East) are likely to see significant appreciation. Signature Island, a high-end luxury residential development at BKC, already commands a price in excess of Rs40,000 per sq ft,” said Sanjay Dutta, CEO of business, Jones Lang LaSalle, India.
“On the whole, Bandra, Goregaon and Andheri have become the hottest residential locations. This is an ideal opportunity for buyers and long-term investors to park their money and reap benefits after some years,” added Dutta. Extended suburban locations in Thane, Vasai, Vashi, Belapur and Kalyan, are also in demand for residential purposes because of their proximity to commercial locations.
Bandra, Kurla, Andheri, Goregaon, Malad, Kurla, Ghatkopar, Vikhroli and Powai are also proving to be popular choices since over 60% of office space in Mumbai gets absorbed at these locations every year. Better space availability, lower costs and access to suburban manpower are causing more corporations to move into these areas.
To address the mounting demand, leading builders such as Kalpataru, Sheth, Sunteck, Oberoi and Wadhwa are undertaking several commercial and high-end residential tower projects to meet the demand of investors and end users. These projects have witnessed a 10% growth in prices in the past four months. “If this trend continues, residential prices may go up slightly by Diwali,” said Dutta.
Oversupply to hit Central Mum
Meanwhile, there is an oversupply of residential and commercial properties at Lower Parel, Parel, Mahalaxmi, Worli and Prabhadevi in central Mumbai. “And, many under-construction projects will be completed shortly. Few of them were stuck due to lack of clarity on government policies and public parking, FSI, developmental control (DC) regulation guidelines etc. Nothing is clear at this juncture. Everybody is confused and it is leading to chaos,” said a real estate expert.
Most of the projects in these areas are structures consisting of 40-85 storeys and exceeding 280m. Such structures require environmental and aviation ministry clearances. High construction costs and a prolonged construction cycle make matters more complicated. “As a consequence, prices for under-construction projects in central Mumbai are now under pressure to fall,” said Dutta.
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