Mumbai’s realty market to drive India’s real estate growth – Here’s why

Source: Financial Express

India’s real estate sector, a rapidly accelerating and dynamic force globally, has demonstrated remarkable resilience and growth in the first half of the year. A comparison of H1 this year with the last reveals a staggering 48% increase in performance among leading developers. The first quarter of this financial year has been particularly exhilarating, with significant consolidation observed. Major players like Prestige, Godrej, and Lodha, with their pan-India presence, are increasingly dominating the market share.

Market Consolidation and Investor Confidence

The first half of the year has seen a clear trend of market consolidation, with top developers like Prestige, Godrej, L&T, and Lodha expanding their market share through aggressive strategies. This period has also witnessed one of India’s largest land deals, signalling robust investor confidence. Japanese investments, particularly in the Mumbai Metropolitan Region (MMR), have been substantial, indicating a strong, ongoing interest in the Indian real estate market. Recently, Sumitomo Realty has invested nearly 200 billion yen in office building development at the Bandra Kurla Complex, a rapidly developing residential and business district in Mumbai. Japan’s Sumitomo Realty has till date pumped around 500 billion yen into Indian Real estate sector.

Transformation of Mumbai’s Real Estate Landscape

Mumbai’s real estate market is undergoing a significant transformation, driven by a post-pandemic demand resurgence and favourable government policies and metro development of 357km across 14 lines. The city has experienced a notable increase in property transactions and stamp duty revenue. Emerging areas are gaining popularity, and the luxury segment is evolving towards sustainable, technology-integrated living solutions. The market’s attractiveness is further enhanced by the influx of developers from various cities, drawn by the high potential for profit and redevelopment opportunities.

Rising Transactions and Emerging Hotspots in Mumbai

The city has experienced a remarkable 14% increase in stamp duty revenue, reaching approximately ₹827 crore by May 2023, accompanied by a surge in property registrations. Despite rising stamp duty and property prices, the frequency of high-value property transactions continues to climb. Neighbourhoods like Malad, Kandivali, Andheri West, Jogeshwari, Borivali-Dahisar, and Mira Road are gaining popularity, with Thane and Kalyan, Dombivali emerging as a prime spot for affordable property sales. Mid-sized apartments, especially those between 500 to 1000 sq. ft, are highly sought after, accounting for around 41% of the market.

Supply and Demand Dynamics in Mumbai’s Housing Market

The housing market’s pulse is dictated by the interplay of supply and demand, leading to consistent price escalations in supply-scarce regions. The allure of Mumbai’s real estate market for developers is on the rise, driven by lucrative profit margins, substantial sales volumes, and opportunities for redevelopment. This is exemplified by the entry of developers from Bengaluru, Pune, and Ahmedabad into the Mumbai market, with DLF’s notable re-entry in Andheri West highlighting the market’s potential. DLF’s investment of ₹400 crore in a project with a potential saleable area of Rs 30 to 35 lakh sq ft emphasises the market’s attractiveness.

Notably, areas like Worli, Prabhadevi, and certain western and central suburbs of Mumbai have witnessed a remarkable price surge. For instance, Chembur’s rate per square foot, once at 30,000, has skyrocketed, aligning with rates in upscale areas like Juhu. This trend underscores the escalating prices in these micro-markets due to the imbalance between high demand and limited supply.

Kalher’s Future Potential – Emerging Investment Opportunities

The Indian real estate sector in Mumbai is experiencing robust growth and consolidation. The luxury segment is evolving, witnessing increased demand for larger apartments, while investor confidence remains high. Strategic locations like Kalher are gaining prominence, presenting lucrative opportunities for investors and developers. Positioned strategically at the center of key locations, Kalher in Thane district offers hassle-free commutability, benefiting from excellent social and physical infrastructure. The surrounding areas, including Thane and Airoli in Navi Mumbai, have transformed into significant IT hubs, boosting employment and driving demand for homes. Additionally, the neighbouring Bhiwandi is swiftly becoming a warehousing hub for major e-commerce players. Priced upto Rs 9,500 per sq. ft, Kalher stands out as a promising micro-market with its strategic location and ongoing infrastructural developments, making it an attractive and affordable investment destination near the city.

Surge in Luxury and Super-Luxury Segments

The luxury and super-luxury segments are experiencing a nationwide upswing in demand, with a marked preference for larger apartments. This trend, initially perceived as a temporary post-pandemic surge, has proven to be a sustained shift in consumer preferences. South Mumbai continues to lead in luxury demand, with similar trends emerging in the western suburbs. Developers are responding by designing larger units, from spacious two-bedrooms to expansive three-bedroom apartments and jodi apartments.

Mumbai’s Booming Luxury Real Estate Market

MahaRERA data corroborates a significant increase in luxury property launches in Mumbai, with sales of high-end homes soaring dramatically. In the first half of 2023, there was an average daily launch of nearly 150 luxury units, a notable increase from the pre-COVID era’s daily launch of around 100 units. This indicates a solid recovery and growth in Mumbai’s luxury real estate sector, with a promising outlook for 2024. The sales of luxury homes priced above Rs 10 crore in Mumbai have surged by nearly 50%, totalling Rs 11,400 crore in the January-June period of 2023. This increase is in line with the overall growth in the residential property market, with primary sales in this segment recording an 83% year-on-year increase, reaching Rs 8,817 crore.

Mumbai’s luxury housing market has been steadily rising over the past three years, marking a significant resurgence of real estate in the portfolios of Ultra High Net Worth Individuals (UHNIs). The ultra-luxury segment, featuring properties in the Rs 40 crore to Rs 70 crore range, has also seen a 64% growth. Remarkably, Malabar Hill recorded the highest annual increase in the value of luxury homes sold, with a staggering 481% increase.

Prospects for Mumbai’s Real Estate Market in 2023

Mumbai’s real estate market is anticipated to see major growth in 2023, contributing significantly to India’s double-digit growth in the sector. Despite challenges like interest rate hikes and inflation, the demand for residential homes remains robust. New infrastructural projects, such as metro lines, are creating new micro-markets and propelling real estate development. The first half of the year has seen a surge in developer performance and a significant influx of investment, signalling a robust market and a shift towards larger, sustainable living spaces. The luxury market, in particular, is experiencing a renaissance with soaring sales and launches of high-end properties. Emerging micro-markets like Kalher highlight the city’s potential as a hotspot for investment and growth. As 2023 progresses, Mumbai’s real estate sector is set to play a crucial role in driving India’s economic expansion, solidifying its position as a key player in the global real estate market.