Demand in Mumbai for Mid Priced Properties - Sarang Wadhawan

HDIL is one of the main Developers in the Island City of Mumbai. HDIL's promoter Sarang Wadhawan in an interview has the following views of the City's changing landscape.

Outlook on residential prices and volumes in the island city of Mumbai and in the suburbs of Mumbai?
Across Mumbai prices have gone up substantially in last 12 months. In most cases it has reached peak of 2007, while in some it has gone beyond 2007 levels. But the important differentiating factor has been that in last 1-1.5 years developers have been concentrating on launching affordable-mid income residential product catering to larger population. While in the earlier cycle most were concentrating on commercial and high end residential. So projects targeted at middle class and priced between Rs2500-Rs8000/sq ft in the suburbs continue to do well. If products are priced correctly, then demand is not an issue in suburb in Mumbai.

Which product types (residential- mass/ luxury, commercial and retail) are likely to see the most action in the next 12 months and the next 3-5 years?
In Mumbai before the crisis, the developers were largely concentrating on commercial, the revival of market happened through residential. We plan to focus on residential in Mumbai for next 12 -18 months. We will continue our focus on affordable/ mass housing where there is huge demand and continue to sell in volumes. There will be some luxury projects also but majority will be governed by affordable mid income housing. If real estate market starts improving further from here, over 3-5 years, developers will start shifting focus back on retail/ commercial. But for next 2-3 years Commercial will take a back seat as current supply is enough for 2-3 years.

On Airport slum rehab project
The construction work is on at 3 locations in Phase I. The work started at these locations between Apr 08-Oct 08 and in last 18-20 months almost 12mn sq ft of construction work has been done at these sites including various amenities like hospitals, primary schools, sewage treatment plants, police station etc. We were targeting movement of people to these sites from April 10, but BMC had asked us to delay the movement due to shortage of water. BMC will review the water situation in July 10. We are hopeful that due to good monsoon, we will get BMC approval in July so that people can be shifted from August/September.

What are current trends on TDR prices and volumes in Mumbai?
The TDRs are not linked to movement of the families but to construction of the rehab units. Currently TDR prices are above Rs3000/sq ft. We expect the prices to remain above Rs 3000 / sq ft in near future. We are targeting volume of 5-6mn sq ft in FY11.

Various Projects of HDIL:
We have 63mn sq ft under construction including the Airport project. ON the floor construction would comprise of ~30mn sq ft. Of this, residential would be around 8mn sq ft (75% of this is pre sold in range of Rs2500-8000/sq ft) and commercial 4mn sq ft( 20% pre leased). Remaining 18mn sq ft is slum rehab projects including Airport project.

Delhi NCR: Recent Launch Prices

Here is the Latest Delhi NCR Latest residential Property Launch Prices

Price in INR / SFT [Super Built-Up Area]

DLF Capital Greens III Delhi, Shivaji Marg 12,000
Ireo Victory Valley Gurgaon, Sector 67 5,250-5,650
Unitech South City - II (Independent Floors) Gurgaon 4,100-5,100
Unitech Vistas Gurgaon, Sector 70 3,200
Unitech Sunbreeze 2 Gurgaon, Sector 69 3,900
Ansal API Esencia Gurgaon, Sector 67
BPTP Park Serene Gurgaon, Sector 37D 3,200
Jaypee Greens Kensington Park Noida, Sector 133 2,800-3,000
Jaypee Greens Kasa Isles Noida, Sector 129 2,900
Paramount Industries Floraville Noida, Sector 137 2,600
Logix Group Blossom County Noida, Sector 137 2,775
Jaypee Greens Kensington Park Heights Noida, Sector 133 2,970
Gardenia India Ltd Gardenia Golf City Noida, Sector 75 3,050
Jaypee Greens Kingswood Oriental Noida, Sector 128 8,100
Jaypee Greens Kensington Boulevard Noida, Sector 131
Logix Group Paras Tierea Noida, Sector 137 2,750

Gurgaon Pricing and Noida Volumes Sizzling

Morgan in a Property Ground Survey of Delhi has the following report,

New launch momentum continues (35.5k in 1Q, the highest in the last nine quarters) and new sales were strong – 21.6 k units pre-sold. Gurgaon prices appear to be rising quickly and Noida volumes appear too good to sustain.

Three corners of Gurgaon offer “something for everyone” – Sectors 92-110 (IBREL, Raheja and Mahindra Lifespace launches – Rs2,200- 2,900 psf), Sector 66-70 (UT, Ansal, BPTP launches – Rs2,700-3,900 psf) and Phase V (DLF, Ireo – Rs5,000-8,000 psf). Volumes are healthy – new sales (4000 units = trailing four-quarter average) and new launches remain disciplined. However, primary market pricing (Ireo’s Arch, DLF Phase V, UT’s Sunbreaze) appear 25% higher in the last six to nine months.

New sales in 1Q was 3.5x Gurgaon (14k units); new launches were 6x Gurgaon (30k units); and available unsold stock (vacancies) was 2.2x Gurgaon (33k units). Intuitively, Noida should have all numbers lower than Gurgaon given that its stock of commercial properties (proxy on size of local economy) is less than one-third of Gurgaon’s. Our channel checks indicate that NCR has a fair component of broker-driven (underwritten) sales, which may be returned to developers if unsold. The silver lining in Noida is good pricing discipline so far (Rs2,900-3,300 psf).

Margins of Mahindra Life Space

Often as a Home Buyer you must have wondered what is the margin for Realty Developers. Here is authentic data from Edelweiss Capital on the margins of each project of Mahindra Lifepsaces.

Lower Parel likely to be over supply zone

Lower Parel has emerged as a major corporate destination in South Mumbai
after Nariman Point, particularly after seeing significant commercial development on defunct mill land. Many corporates have built corporate offices in the area while many more are in the pipeline. The area has also seen the development of many high-end residential projects, particularly in the last three to four years, targeting the elite South Mumbai buyers.

Going forward we believe that 1) Lower Parel is likely to see supply of over 10 msf in next 3-4 years thus making it an over supply zone 2) Prices in this zone is likely to correct taking into consideration above supply, supply of NTC mills, not yet factored in(3) Surroundings areas like Worli, Prabhadevi, Mahalaxmi etc will be buyers first choice taking into consideration better infrastructure facilities. We believe new launches from DLF, Lodha Raheja has to be at decent price (Rs 15,000-20,000 psf) to bring absorption in Lower Parel.

Big players like DLF and Lodha are expected to launch high-end projects in Lower Parel – in our opinion, to drive absorption levels, it is critical that these projects are rightly priced. We believe that prices at Lower Parel should be discounted to Worli, Mahalaxmi and Prabhadevi due to quality of infrastructure facilities and congestion levels. Lower Parel may also see higher absorption if lower unit size of 1000-1500sq ft is introduced as against the current average unit size of 2500 sq ft.