Why are real estate developers making a beeline for Mumbai and Bengaluru markets? - Hindustan Times
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Why are real estate developers making a beeline for Mumbai and Bengaluru markets?

ByMehul R Thakkar, Shakshi Jain
Jun 24, 2024 09:02 AM IST

Several real estate players from Bengaluru have entered the Mumbai market. Similarly, Mumbai-based builders have set foot in the garden city

In the past decade, at least half a dozen real estate developers from Mumbai and Bengaluru have expanded their presence in the two cities. Several firms such as Bengaluru-based Prestige Group, Puravankara and Delhi-based DLF have either entered or announced their foray into the Mumbai real estate market. Similarly, Mumbai-based realtors such as Lodha and Godrej have stepped foot in Bengaluru.

An aerial view of housing and real estate in Mumbai.(Bachchan Kumar/HT PHOTO)
An aerial view of housing and real estate in Mumbai.(Bachchan Kumar/HT PHOTO)

But why do developers want a share of the Mumbai and Bengaluru real estate markets? This is primarily to expand and consolidate their presence across cities, said real estate experts.

The expansion pattern is more evident with listed real estate developers rather than that of unlisted or mid-sized realtors in these cities, experts said.

Better margins and high sales velocity draw developers to Mumbai

Bengaluru-based Puravankara Limited entered the Pune market in 2017 and the Mumbai market in 2021. The company has been in expansion mode in both Mumbai and Pune for a couple of years. The company also aspires to have a sizable portfolio in the commercial segment of Mumbai and Pune markets.

Also Read: Puravankara buys 12.75 acre land near Mumbai; to develop housing project with a revenue potential of 4000 crore

"The Mumbai real estate market is a natural choice when it comes to expansion because of several reasons. The first reason is that the Mumbai Metropolitan Region (MMR) is the largest market in the country and is almost equal in size when compared to the entire South India real estate market. Secondly, MMR offers products across price segments that range from ultra luxury to affordable housing thus enabling a wide product range," said Rajat Rastogi, CEO - West and Commercial Assets, Puravankara Limited.

"Today as we speak, Puravankara in Mumbai and Pune's residential real estate market has around 4.5 million sq ft under development and this includes multiple projects in Mumbai and Pune. We have plans for launching six to seven projects in Mumbai and Pune in the next one year. We are also having plans on developing a sizable commercial real estate portfolio for Mumbai and Pune. So, we are not just having a footprint but also expanding deep in Mumbai and Pune," said Rastogi.

Another Bengaluru-based developer Prestige Group as of FY24 has 37 ongoing projects. Of these seven projects are in Mumbai, 20 in Bengaluru and the remaining in cities like Hyderabad, Calicut, Mangaluru, Kochi, Ooty, according to the company's investors’ presentation for FY24.

The company has a pipeline of 30 projects of which three are in Mumbai and 17 in Bengaluru.

Also Read: Prestige Group planning mid- segment housing projects in Thane, Panvel near Mumbai

A Mumbai-based developer not wishing to be named told HT Digital that he launched a project in Pune despite having a healthy portfolio in Mumbai. “What I can earn by constructing one sq ft in Mumbai, I will have to construct 20 sq ft in Pune. It therefore, makes sense for listed players to enter the Mumbai market. Mid and small-sized developers should continue to work in their home turf Mumbai," he said, adding being the financial capital, it puts you on a different scale and price point as there is demand for luxury housing.

North Indian developer forays into Mumbai; Mumbai realtor enters Gurugram

Delhi-based DLF is expected to launch a project in Mumbai's Andheri this financial year. DLF is developing the Slum Rehabilitation Authority project in a joint venture with the Trident Group.

In November 2023, Oberoi Realty announced the acquisition of 14.81 acres of land in Sector 58 in Gurugram, Haryana for 597 crore. The land potential is estimated to be up to 2.6 million sq ft of floor area. The company plans to develop a luxury residential group housing project on this land.

Are cheaper land prices drawing Mumbai developers to Bengaluru?

Bengaluru is the top choice of Mumbai-centric developers aspiring to become multi-city or national players. Industry experts who spoke to HT Digital listed availability of land and high end-user demand as opposed to an investment option as prominent pull factors for this market.

“Bengaluru, which is the largest commercial market of the country, has a lot of demand. That is where the interest of other developers has moved into the city and they have expanded here,” said Shantanu Mazumder, executive director for the Bengaluru region at property consultancy Knight Frank India.

Also, as cost of construction does not vary much from city to city, cheaper land prices compared to Mumbai help developers balance profit margins in Bengaluru, he explained.

In the past decade, several established names from Mumbai, ranging from Godrej Properties to Tata Housing and Mahindra Lifespaces, have made successful entries into the garden city.

In the latest example, Lodha has made its foray into Bengaluru with two luxury residential projects in the southern and eastern corners of the city.

Godrej Properties has deepened its presence in Bengaluru with over 30 projects across categories, as per data available on integrated real estate platform Square Yards. Tata Housing on the other hand, has undertaken nine projects so far in the city. Mahindra Lifespaces, which entered Bengaluru in 2015, has launched four residential projects.

Also read: Bengaluru tops list of cities with highest rental yield of 4.45% in Q1 2024; Mumbai second with 4.15%

Bengaluru is an end-user driven real estate market

With the presence of a healthy mix of experienced home brands such as Sobha, Puravankara, Provident Housing, RMZ and Brigade, among several others, wooing Bengaluru's savvy customers requires battling heavy competition, experts said.

“Bengaluru is a huge market. There are at least 17-18 established operators in the Grade A space. Many developers who came to Bengaluru have struggled with their first 1-2 projects because they have to have a proven track record to win confidence,” Mazumder explained.

Customers here are experienced, having seen home players evolve, he said. Therefore, a new player usually makes a conscious call to start out slow and live through the entire life cycle of 2-3 projects before expanding further.

“Bengaluru is not a speculative market, it is a very clear end-user driven market,” said Mazumder.

"In the commercial segment, one has to first identify, build and then lease out. So the player has to remain invested in the project for 4-5 years and then lease. Hence, most of them are keen on starting with residential and then slowly over time build the commercial portfolio," he added.

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