Realtors in Mumbai continue to find it profitable to start redevelopment projects despite supply increasing after COVID-19 since prices and rentals have skyrocketed.
Mumbai’s shifting skyline gives the impression that the city is quickly emulating New York. Owing to renovation, the city occasionally sees the construction of a new skyscraper. A number of listed companies are also redeveloping older buildings at a rapid pace, even in spite of the significant increase in housing supply that followed COVID-19.
Real estate analysts claim that as a result, not only have apartment capital values increased by 40–50% following the renovation of older buildings, but rents have also skyrocketed over the past three years.
Two listed developers, Man Infra Construction Limited (MICL) Group and Raymond Realty, the real estate division of the Raymond Group, announced on June 10 that they had acquired two historic buildings in Mumbai’s Bandra East neighborhood.
Raymond Realty said that it has been chosen to construct a residential project with a potential income of over ₹2,000 crore in the Bandra East region of Mumbai. The business has previously inked three collaborative development agreements for projects worth over ₹5000 crore in development, located in Mahim, Sion, and Bandra.
Additionally, MICL announced the purchase of a redevelopment project in Mumbai’s Bandra East neighborhood, Kalanagar. The project, according to the business, would be extremely luxurious and have a 5 lakh square foot building potential. The most expensive commercial business sector in India, Bandra Kurla Complex (BKC), is not far from the project.
Oberoi Realty declared this month that it will renovate seven historic buildings in Worli, Mumbai’s Adarsh Nagar neighborhood, totaling 504 apartments. 6.24 lakh square feet of RERA carpet to be sold on the open market would be given to Oberoi Realty in exchange.
Mumbai’s Pali Hill redevelopment project will be developed by Puravankara Ltd., a real estate development company located in Bengaluru, starting in April 2024. A total projected development potential of 4.10 is assigned to the project.
In Mumbai , Ajmera Realty, MICL, Oberoi Realty, Rustomjee Group, and Raymond Realty. Prestige Group, Puravankara, and Kolte Patil Developers, all situated in Bengaluru, are a few of the few listed real estate developers with rehabilitation projects under their belt.
Rustomjee Developers’ chairman and managing director, Boman Irani, stated in July 2023 that the company’s exposure to redevelopment projects was 11% at the time of filing for its initial public offering (IPO) in November 2022, and that percentage may increase to 30% in the future.
12 of the 15 new developments (projects) that Irani’s business added in the previous two fiscal years are redevelopment projects, he informed investors during the Q4FY24 earnings call.
Redevelopment’s effects on Mumbai’s capital prices and rental income
Developers and advisors claim that as more historic buildings are being redeveloped in Mumbai, the rental yields and valuations of projects have increased.
“Rentals have increased in the city as a result of a significant gap between supply and demand for rental housing. This is due to the fact that all 100 homeowners would be unable to rent a property in Mulund itself if a housing society consisting of 100 apartments decides to undergo renovation. Because they don’t have many alternatives, at least 20% could need to seek outside of Mulund,” said Vishal Thakkar, a partner at the Mumbai-based real estate company Prem Group.
“If one were to take the price of an apartment into account in terms of capital values,
