Bottom Line: Redevelopment and luxury projects are often seen at two different zones of real estate portfolio. However, some of the developers in Mumbai are redefining the rules of the game and Ravi Sinha finds there lies a symbiotic relationship between these two altogether contrast project portfolio.
When a few developers in Mumbai with deep roots in the slum redevelopment forayed into the luxury projects in the last few years, there had been stories galore in the media space and the realty community itself. Many questioned the reasons and the rationale of this sudden Bottoms Up approach, while others believed it is just a strategic shift to make moolah at the top of the realty pyramid. Some theories even suggested it is a brand makeover for a long term capital infusion, including the IPO in the years to come.
However, the fact remains that each company has its own reasons to foray into luxury and super luxury segment, with one or the other reasons mentioned above may or may not be the reasons behind their portfolio diversification. But what is worth understanding in this dynamics is the fact that redevelopment at the bottom of the pyramid always has a symbiotic relationship at the top of the realty pyramid in luxury and super luxury segment. After all, policy incentive is always there if the developer is smart enough to cater to the segment with well thought out strategy.
When one develops a slum, for instance, and even if 20 per cent of land is given for commercial use as incentive in the bargain, it is a deal for the developer. After all, in the space starved city like Mumbai even a small chunk of land in any of the prime location is a rare commodity. The question is if such a business dynamics is a feasible model, why did the developers shied away from making the best of it so far.
The answer lies in the infrastructure and better connectivity where the Worli Sea Link has made some difference and the Trans-Harbour Link, as and when it becomes a reality, is expected to be the game changer like never before. After all, developer needs separate entry roads for their luxury apartments. Failing this, roads linking with the slum rehabilitated apartments won’t fetch any dividend to the premium positioning of the project.
Pranay Vakil, Chairman of Praron Consultancy agrees that things are changing fast post the new DCR rules. According to him, arm twisting by a few, howsoever small group they may be has been the reason what deters the large developers and investment into redevelopment projects.
“Even if more than 90 per cent are willing for the redevelopment, a few vested interests can be game spoiler. And I feel it is here that the role of state machinery has to be pro-active and not populist. The decision making process can be democratic, but not the implementation. State must be a party to make sure the redevelopment plan is implemented in an authoritarian manner,” says Vakil.
Amit Nagpal, Director of Nagpal Developers says demand on prime land is more and hence it makes sense to get into such high end categories. He maintains many NRIs from Dubai and other parts of the world have approached them for prime locations of Mumbai that can offer new flats post redevelopment. Demand is more in the premium segment, depending on the locality.
“The government has to ensure that the developers get right opportunity based on their past projects and right redevelopment track record. The scope of redevelopment is so much in cities that even some of the bigger developers who had earlier avoided to get into this segment, are now focussing on redevelopment. Actually, everyone in Mumbai is looking for redevelopment options. Market has been stagnant so far due to policies coming in the way of redevelopment projects. There is always good demand and no stock available in prime localities,” says Nagpal.
Jaycee Homes is in Luxury segment housing with projects at Khar, Bandra Santacruz, Juhu and many other upmarket suburbs. But they are also into redevelopment and have a separate team looking after this division of our business.
Diipesh Bhagtani, Executive Director Jaycee Homes says redevelopment is another stream of construction and in no way inferior to developing any other building. According to him, maintaining your brand ethos if you are in luxury segment which is meant for the niche and communicating to the masses without diluting brand image is the biggest challenge
“If the final product is good, not only society members talk about it but also people in the vicinity. They tend to compare the old building with the new one and the good work is eminent. There is a lot of positive talking about this project. This makes a brand more visible. As we all know addressing to a few people is much easier then addressing to the masses which make the bottom of the pyramid. This is a very complex segment with various attitudes and temperament,” says Bhagtani.
Another developer which has made significant strides from redevelopment to super luxury segment is Omkar Realtors & Developers. Devang Varma, Director, Omkar Realtors & Developers believes that with more than 50 per cent of the city’s population residing in slums occupying a large share of the city’s space, slum redevelopment will continue to dominate the redevelopment share even as other forms of redevelopment including those of cessed and dilapidated buildings, cluster redevelopment, contravening structures (BMC), rehab of PAP and MHADA buildings are steadily gaining pace.
“Developers handling redevelopment projects are coming up with luxury residential offerings as the market holds good potential for this category and Mumbai has hardly any open land parcels. Also, the developers have invested substantial time and money in redevelopment projects whereby free sale portion is the only route to generate profits,” says Varma.
So, the taboo that earlier used to be due to work in the redevelopment has over a period of time turned the other way round. The developers are now finding it more symbiotic relation between the top and bottom of the pyramid, and that is fast evolving as a lucrative business model for them.
