NARIMAN Point in south Mumbai, the commercial hub of India’s financial capital, has for years had the dubious distinction of being the most expensive piece of property in the country. Dubious, because the infrastructure in the district is so depressing, that no modern metropolis in the world would want to lay claim to it.
All the top Indian corporates and most multinationals operating in India have a presence in Nariman Point. Even Mukesh Ambani, the chairman of Reliance Industries – who earlier this month became the richest man in the world for a few days, with assets swelling above $63 billion thanks to the stock market boom in India – also has his office in Nariman Point.
But right outside his swanky office, and plastered across the commercial district, you will find shabby scenes: of hawkers cleaning their utensils on the pavements, of thousands of office workers grabbing a quick bite of Bombay’s famous cuisines, ‘pav-bhaji’ or ‘wada-pav’ from the vendors, then washing their hands on the roads, of beggars pestering tourists, of itinerant ear cleaners pushing tweezers and tongs to de-wax bored cabbies, and of eunuchs doing their rounds.
Scenes, not exactly from the commercial hub of an aspiring global financial hub, you would say. But despite the crumbling infrastructure in Nariman Point, corporates both domestic and international are willing to spend a fortune on leasing office space or even acquiring units.
Last week, international real estate consultant CB Richard Ellis came out with its half-yearly survey on global rents, which placed Mumbai – especially Nariman Point – way up at the top, next only to London. Average office rents in Nariman Point, the survey noted, add up to nearly $190 a sq ft, a 55 per cent jump over the previous year’s figure. London’s West End is the most expensive at $330, but other cities – including New York, Los Angeles and over a dozen other American cities – are way below these levels. Midtown Manhattan, the priciest in North America, ranks a lowly 12th, with annual rents of a little above $100 a sq ft. Other pricey cities include Moscow, Tokyo, Paris, New Delhi, Hong Kong and Singapore.
Anshuman Magazine, chairman and managing director, CB Richard Ellis South Asia, warns that high rents in the city could act as a deterrent for future investments. But with money flowing into the stock markets from all over the world, demand for office space in south Mumbai is unlikely to slacken in the near future.
Last week, an NRI from the UK also paid an eye-popping Rs100,000 a sq ft for a plush apartment in Nariman Point, shattering all previous records. The flat was being auctioned by a leading international bank, and there were several bidders offering fancy prices for it.
WHILE the property bubble has burst in the United States and a few other western countries, in India there appears to be no end in sight to the buoyancy in the real estate market. Last week, about 50 top executives from the Gulf countries descended on Mumbai to participate in an international real estate exposition.
While many of the participants were selling apartments and villas in Dubai and other emirates of the UAE to rich Indians, quite a few of the developers were over-awed by the vibrant Indian market.
The opening of the real estate sector to foreign direct investment (FDI) has transformed a once sluggish industry. International developers and financiers from the US, Canada, the UK, the Middle East and South East Asia have ploughed in about $10 billion into the real estate sector in India so far.
Gulf-based developers and financiers are also planning to inject an additional $25 billion into the Indian property business over the next two years. The real estate market in India is expected to balloon to $50 billion by 2010 and double to $100 billion by 2015.
Several high-profile developers from the region and from the US were in Mumbai last week, negotiating with Indian partners and seeking joint ventures. The most prominent was Donald Trump Jr of the Trump Organisation, who declared this was the right time to enter India.
Trump said his group would invest in up-market residential properties in Mumbai, Delhi, Bangalore and Hyderabad, besides resorts in Goa. The organisation is discussing with leading Indian developers, seeking collaboration, and the first few projects would take-off in about 18 months.
Another American realty major, Tishman Speyer, recently launched its first project in Hyderabad. The company has set up TSI Ventures in a joint collaboration with India’s ICICI Ventures. The maiden project is a 2.2 million sq ft commercial one in the southern Indian city of Hyderabad.
The joint venture will be raising its second India dedicated fund this year, says Katherine Farley, senior managing director of Tishman Speyer. About half of the existing $700 million fund would be committed in the current year, she adds.
The company has also won a prestigious project in Hyderabad, to set up a $2 billion self-contained township on the outskirts of the city. Spread over 400 acres, it would include 20 million sq ft of residential and commercial space.
BUT the most significant deals in the real estate sector are being stitched up by the country’s largest developer, DLF Ltd. Kushal Pal Singh, chairman of the group, is today the world’s richest property baron, with personal wealth exceeding $35 billion.
DLF has built an enviable land bank, which will ensure that its plate is full for the next few years. Last week, DLF sold off a 49 per cent stake in eight residential projects for about $425 million – seven of these were sold to Merrill Lynch for $375 million. The move will enable the group to unlock part of the value in its land bank.
For Merrill Lynch, which has invested over $500 million in the property business in India, this makes sense as it gets to partner the country’s leading developer in putting up prime properties across thecountry. Other American financial majors, including Blackstone, Citigroup, 3i and JP Morgan Chase, are also chasing deals around the country.
The Delhi-based DLF, which is the single largest private developer in Gurgaon – a satellite city to the capital – has been entering into tie-ups with leading international players. It recently joined hands with Hines, an American property investor, to promote a commercial complex in Gurgaon.
But the most important deal it signed was with Limitless Holdings of Dubai, for promoting a $15 billion, 4,000-hectare township on the outskirts of Bangalore. Other Dubai-based developers have also been rushing in with tie-ups with Indian partners to develop residential, commercial and retail projects, besides IT parks and self-contained townships.
Emaar Properties, the largest Middle East-based developer, has a joint venture with Delhi-based MGF. It is putting up several prestigious projects in cities like Chandigarh, Gurgaon and Hyderabad. Over the next five years, it hopes to develop over 100,000 residential units.
Dubai’s leading business house, Al Futtaim’s, is also planning a festival city – like the $15 billion one in Dubai – in India. Damac Properties and Deyaar Real Estate have plans to invest $5 billion each in India over the next three years in cities like Mumbai, Delhi, Bangalore and Hyderabad.
Hussain Sajwani, the Damac chairman, who was in Mumbai last week, says the group is in talks with several leading Indian developers for a possible tie-up.
And Dubai’s Technology and Media Free Zone Authority will soon begin work on an ambitious SmartCity, an infotech complex, in Kochi, the commercial capital of Kerala. The $400 million project will generate employment of over 100,000 jobs over the next decade.
Demand for residential, commercial and retail properties is huge in India. About 150 million sq ft of office space is being developed currently, and will enter the market over the next two years. But there is a massive 20 million unit shortage in the housing sector.
India is also witnessing massive urbanisation, with about 300 million people expected to move out of villages to cities over the next 20 years. There has been a spurt in the number of cities with a population of over one million – there were just 35 such cities in 2001, and by 2010, there will be 53 cities with a million-plus population.
The frenzied growth in the real estate sector is unlikely to slow down over the coming years, considering the huge demand and the massive shift in population from villages to cities.
Dear visitor, the comments section is undergoing an overhaul and will return soon.