The place makers in Mumbai realty
Real estate valuations are not location led anymore but 'development-led'.
Residents and potential home buyers in Mumbai might agree that Hiranandani group, Oberoi realty and K Raheja Corp are arguably among the most reputed delivery-led developers in the Mumbai metropolitan region. They have all demonstrated intent to create landmarks and destinations beyond just delivering buildings, sometimes defining a whole suburb and significantly influencing the attractiveness of a location. Their product and quality have consistently stood out commanding a strong brand recall, without having to excessively lean on broking networks to hard-sell their projects. ‘Do less, do well’ seems to be a common thread among these successful developers.
Gated islands of comfort
The unfortunate reality of Indian urban development is that private developers are forced to create superior infrastructure in the form of integrated developments as the public infrastructure outside the gated societies is woefully inadequate. As home buyers specifically in dense urban cities, we all crave a high livability quotient both inside and outside our homes.
This is one domain where developers like Oberoi realty and the Hiranandani group have mastered over time ahead of other developers in the city. Their homes are not tiny, come with good design and internal specifications, adequate outdoor amenities and offer a clean and green ecosystem with ready social infrastructure.
Hiranandani Gardens and Oberoi Garden City – Destinations crafted over time
The book ‘Moguls of real estate’, published at the peak of the last Indian real estate cycle in 2007, featured the journey of 5 of the leading developers at the time. 15 years later, 3 among the 5 developers featured – Hiranandani, DLF and Prestige are still among the top developers in the country reflecting their strong delivery track record and their ability to survive and emerge stronger through market cycles.
The book carries interesting anecdotes on how Hiranandani was one of the first few developers to innovate in construction quality management as early as the 1990’s, including introducing copper plumbing, staying ahead of IS code specifications, introducing water-proofing advancements and use of fly-ash in concrete, demonstrating their intent to become a strong engineering and quality led brand.
It is a fascinating journey of how a world-class mixed-use destination was created from a blank canvas of rocky quarry land over a period of 2 decades. The valuation surge from INR 400 per Sq. Ft. to 40,000 per Sq. Ft. is a result of consistently delivering quality homes in a self-sustaining ecosystem.
In another publication ‘The Consolidators’, the author recounts a story of how the promoter of Oberoi realty made multiple visits to meet the Swiss MD of a MNC pharma company to persuade him in selling their 60-acre Goregaon land to Oberoi and eventually succeeded by communicating the vision of creating a differentiated destination.
Inspired by the Mandarin Hotel on the top floors of the Time Warner Center building in New York, a mixed-use building was envisioned in Goregaon, one that would house Grade-A offices and a premium hotel. A mall and school were opened in the development before launching apartments. Within 100 days of the mall opening in 2008, it had registered 2 million footfalls despite being located in the then decrepit Goregaon suburb.
Almost 15 years after the initial ecosystem was created, premium apartments at Oberoi Garden City trade between 30,000 – 35,000 per sq ft, at a steep premium over other developments even of reputed developers. Till date, Oberoi Garden City is a poster boy for integrated developments in Mumbai’s suburbs with its record of elevating the positioning of Goregaon suburb and its vicinity.
Categories of developers: Place makers and project builders
The prime difference between place makers and project builders is that place makers create desirable living destinations which the builders feed off. Place makers do not shy away from creating semi-public infrastructure that drives up property values of all developments in the vicinity.
Chandivali, a nondescript industrial suburb, gained prominence as Hiranandani Gardens in Powai shaped up as an aspirational enclave with superior livability. Other projects by builders were marketed with now-familiar monikers like upper or lower Powai to allude the aspiration levels to Hiranandani’s township in Powai.
Goregaon East, which was known more for the Dindoshi Bus depot and the Aarey greens, burst onto the home buyer map as Oberoi Garden City took shape along the Western Express Highway. Many professionals did not mind the infamous Western Express Highway crawl all the way to BKC or Lower Parel, just to be able to have access to all conveniences minutes away from home.
Oberoi invested in creating the social infrastructure including the mall and a school before most of the premium residential phases were launched, ensuring ready social infrastructure when occupants actually moved in, enabling price premiums.
The pioneering work by these developers has ensured that real estate valuations are not just a function of locations anymore, as it is about the development. Gone are the days where one looks at real estate valuations linearly as you move from Thane or Borivali into the island city. Quality integrated developments in north-ward suburbs might command an equivalent or higher pricing compared to a yet another run-of-the-mill residential building though built in a better location, say towards the island city.
Oberoi in Goregaon and Borivali, Hiranandani in Powai & Thane, L&T in Powai and Seawoods, Godrej in Vikhroli are prime examples on relevance of development-led valuations taking precedence over a location-based approach.
As a home buyer, you have the choice of paying the price premium the place making developer would rightfully command or pay a lower price and buy other projects in the vicinity. The gentry of these developments would vastly differ though.
Home buyer criteria: Loyalty and longevity
The simplest heuristic as a home buyer in evaluating a developer’s long term track record is to evaluate customer loyalty and longevity associated with the developers’ projects.
Buyer Loyalty: Percentage of sales that materialize through repeat purchases and customer referrals indicates organic loyalty built over time, on account of consistent delivery and quality. As a home buyer, it is hard to know this as a quantitative metric but a brief chat with existing occupants of past delivered projects would be enough to get a qualitative opinion.
When Oberoi launched their recent premium residential phase ‘Elysian’ comprising large-sized homes in Goregaon at average prices of over 30,000 per Sq ft, almost a third of buyers were repeat purchasers or referrals. This quantum of organic buyer loyalty for ticket sizes of 7 crores or above is astonishing and reflects the brand equity the developer has created over time.
Similarly Hiranandani’s high brand affinity ensured that Powai residents were a significant chunk of early buyers in both Thane and Panvel townships as they were launched. Other developers like DLF and Prestige also command superior buyer loyalty in their stronghold markets of Gurgaon and Bangalore.
Longevity as seen through resale values: Resale values of completed developments a few years after delivery is the best indicator of the developer’s long-term approach and quality delivered. This aspect is often overlooked by many home buyers, who base a decision of buying a generational asset by betting on the developer offering the most attractive price sweetener.
Resale values are a valuable metric as they indicate organic buyer demand for a property, removing the developers’ sales and marketing machinery out of the equation.
Pardon the cliched quote but this is an undeniable truth in the purchase of a long-term asset – ‘The bitterness of poor quality remains long after the sweetness of low price is forgotten’.
Projects where developers cut corners while building the project because of lower pricing only start depreciating in value after delivery. There is a reason why projects of developers mentioned above trade at a premium and there is a reason they are able to hold pricing as other developers scramble to lure you a bouquet of offers.
Bigger and better to come?
It is an interesting parallel to observe as Hiranandani is currently building to replicate their Powai and Thane successes in Panvel, while Oberoi is stepping into Thane’s prime location for building their third large integrated development after proven successes at Goregaon and Borivali.
Both developers have diverse challenges to address. Thane is a mid-segment hot bed with presence of possibly every branded developer offering 2 & 3 bed homes in the 1 to 2 Crore price range. Oberoi has indicated that they will be building yet another premium mixed-use ecosystem and hence should clearly stand out from other stand-alone projects.
Hiranandani Estate fueled the price growth of many stand-alone residential projects along Ghodbunder road and enhanced overall demand for suburban Thane. Similarly the Oberoi development might elevate demand and price trajectory of the prime Pokhran road, Vasant Vihar and vicinity in Thane.
The market is keenly watching Oberoi’s strategy to replicate their western suburbs success in sustaining a price premium over other developers in a crowded market, but over many years through the life-cycle of a large project.
As Hiranandani builds to replicate their Thane success in Panvel, the location unfortunately has not seen urban development as much as the developers would have anticipated. There is a threshold to second home buyer demand and even second home buyers or investors might appreciate a more vibrant vicinity and better rental prospects. This part of Panvel is yet to attract enough white- collar jobs on its own unlike Thane and is neither easily accessible to existing business districts in MMR.
The potential game changers for bringing jobs closer to Panvel are the MTHL bridge, Navi Mumbai airport and increasing interest in Navi Mumbai as a data centre destination. It might be interesting to observe Hiranandani group’s strategy of leveraging the infrastructure upgrades and plan for future development assets in making the township successful.
Branded developers upping the game in integrated developments
L&T at Powai and Seawoods: L&T Realty is creating a mixed-use integrated development ‘Elixir Reserve’ in their own 60-acre land parcel in Powai-Saki Vihar, right across another 19-acre residential project they have delivered. With an ICSE school, captive retail, commercial office buildings and a hospital in the vicinity, L&T is ticking all boxes to create a livable community.
L&T has experience in building the 40-acre Seawoods Transit-oriented development in Navi Mumbai, where home prices trade around 24,000 per Sq. Ft., a price point comparable to some projects in Mumbai’s central and western suburbs. The strong offtake is on account of the developer brand and the TOD mixed-use premium of easy access to the station, a premium mall and grade-A offices.
Godrej in Vikhroli: Godrej Group has over 2.5 million sq. ft. of commercial office spaces housing marquee multi-nationals, a multi-specialty hospital and premium apartments all located adjacent to the vast Vikhroli mangrove reserve. With a Taj Hotel and a first of its kind sculpture park slated to open soon, the Godrej Vikhroli precinct offers a unique living proposition of a mixed-use city with close access to nature and better air quality in the ever-polluted city.
Prestige in Mulund: Prestige was one of the pioneers of developing integrated developments in South India through their ‘Shantiniketan’ project spread over 100 acres in Whitefield way back in 2005. Prestige now has embarked on creating a ‘Prestige City’ franchise of integrated developments, starting with their hugely successful launch of the 180-acre layout in Sarjapur- Bangalore in 2021, followed by their integrated development of the same name in Mulund, Mumbai which opened to huge success last year.
While Mulund is a high-supply market with presence of many branded developers hence limiting price growth, Prestige’s differentiated strategy of creating a mixed-use ecosystem with office spaces, retail, school within a 32- acre layout at reasonable price premiums seems to be attracting both first home buyers and upgraders.
Home buyers in Hyderabad can watch out for the third edition of Prestige City expected to be launched soon near Shamshabad close to the city’s airport.