Suntek Realty

Mumbai-based premium real estate developer has announced the signing of a definitive agreement with leading global investment firm KKR for the construction of its flagship projects in the city. Under the said agreement, KKR’s investment vehicles, will provide funding up to Rs150 crore (US$22.4 million) towards the construction of Sunteck’s flagship luxury residential developments viz. Signia Isles and Signia Pearl to be located in Bandra Kurla Complex, Mumbai.

Talking about the partnership, Kamal Khetan, Chairman & Managing Director, Sunteck Realty Ltd., said, “We are excited to enter into a relationship with such a major and experienced global investor like KKR and attract this strategic investment. In the past, Sunteck has grown with a good mix of debt and equity with few and exclusive partners and going forward, looks at this transaction with KKR as the initiation of a long-term strategic partnership.   We see appealing acquisition and growth opportunities in today’s market and believe Sunteck can leverage its brand and execution strength – and that of its partners – to explore large acquisition opportunities in the near future.”

Sharing his thoughts on the partnership, Sanjay Nayar, CEO of KKR India was quoted saying, “We are delighted to have partnered with Sunteck. KKR’s investment in Signia Isles and Signia Pearl is the beginning of our relationship with the group. Sunteck has a strong reputation and execution track record in Mumbai, where we see compelling residential and commercial real estate investment opportunities. We look forward to deepening our relationship with the group to explore more of these opportunities in the future.”

Signia Isles and Signia Pearl, expecting openings in 2016,  has brought in lot of interest from high-profile tenants such as industrialists, senior executives of leading financial services firms and corporations, and Bollywood personalities.

Uber Luxury apartments in Bandra – Kurla Complex

BKC (Bandra – Kurla Complex), which is turning to be the next leading commercial business districts in Mumbai, is now also the residential hub of HNIs (high-net worth individuals), industrialists and other big names of corporate, as they are booking their ultra- luxury apartments. As per the reports, these people are paying between Rs. 35 crore to Rs. 60 crore for uber – luxury apartments in the Bandra – Kurla Complex, however; some other high ended residential projects are demanding the value of Rs 55,000 per sq ft.

Ultra-rich buyers, who booked their apartment or duplexes in Bandra – Kurla Complex:
The few names who have booked their dream duplexes in BKC (Bandra – Kurla Complex) are; Vikram Pandit Co-CEO of Deutsche Bank for Asia/Pacific, Nimesh Kampani, Kishore Lulla from Eros International, Gunit Chadha, Chairman of JM Financial, Harsh Mariwala from Marico, Ashok Wadhwa from Ambit Holdings, Jalaj Dani from Asian Paints and Gautam Adani Ex head of Citigroup. It is also noticed that the Surat – based diamond merchant , Hitesh Patel, who was the highest bidder for the suit of PM Narendra Modi booked their choice of apartment in BKC, CEO of Citi India, Pramit Jhaveri and MD and Country Head of Credit Suisse Mickey Doshi are among those who have booked their duplexes in BKC (Bandra – Kurla Complex).

Most of the ultra-rich buyers book their luxury duplex in Bandra – Kurla Complex not for investment, but for living and staying here due to the strategic location of BKC. All the ultra-luxury flats in Signature Island, among residential projects which was constructed and build by Sunteck Realty in the Bandra – Kurla Complex’s G Block. However; these apartments are coming in two different sizes as the bigger one is of 11, 000 sq ft whereas; the smaller one are about 7, 000 sq ft.

A report from Cushman & Wakefield, said that presently BKC doesn’t have enough residential developments due to lack of ultra rich buyers. Whereas; the corporate clients of BKC can be identified by their high-income that ranges from mid management people to high management people from top level organizations. In shot we can say that this is class of people who have much more purchasing power than anyone else. It can be noticed easily if you are working in BKC commute and you are coming here from far-flung suburban areas or south Mumbai or central Mumbai,. so it will take two to three hours in travel on daily basis and this can be main reason why real estate developers are developing high – end housing units in BKC, but still some of the real estate developers has not tapped the complete demand of residential space in BKC.

The report also stated that, once develop as ultra rich destination, so it will becomes the house address for ultra rich corporate people and it will also serve the sub – markets of Mumbai such as Worli, Thane and Bandra. It is central location and has easy connectivity with other parts of Mumbai including both south and north Mumbai. However; there is gapping difference between the number of residential units which is launched in BKC and non-BKC location. Approx. more than 4, 300 residential housing units have been launched in the catchment area which includes non-BKC as well as BKC area of which only 220 units belongs from BKC.

Realty market Mumbai

Now Mumbai is seeking to amend its more than 24 year old building rules which will allow slums to mushroom and it will keep housing beyond the reach of most of more than 19 million residents. As we all know the fact that world’s second-most densely populated mega city is the part of the prime minister’s “Housing for All” programme in which more than 20 million new homes will be available in all over India by the end of 2022 to help eliminate urban slums and squalor.

According to theory of experts, in real estate market the supply of apartments should increase with cut or discount in property prices to help India’s financial capital emulate wealthy peers including New York and Shanghai. This island-city has little available land for development and it is promising challenge to its floor space index (FSI) regulations that may permit developers to tear down old structures and build skyscrapers. It could be good news for some real estate developers such as; Sunteck Realty, Godrej Properties, Peninsula Land and Oberoi Realty as per the reports of Edelweiss Financial Services.

As per the statement of Vyomesh M. Shah, Managing Director of Hubtown, which is Mumbai based developer house, it is the only way to solve the perennial housing shortage in this city, where most of the people are living in pigeonhole-size apartments. Recently, the Municipal Corporation of Greater Mumbai has proposed to increase the FSI, to range between 2 and 8, compared with an earlier cap of 1.33. FSI determines the maximum floor area allowed in a building relative to the land on which it is erected. In 1964, when first time it was introduced than it was set on the cap of 4.5, which means on a one acre (0.4 hectare) plot of land, which is little smaller than a football field, living space totaling only 196,000 square feet could be built. However in 1991, policy makers make it low as 1.33 times, which was a move contrary to what most cities with limited land have tended to do for raising the permitted FSI to accommodate demand of real estate, as in Singapore, HongKong, Manhattan and some Chinese cities.

The proposed change will allow for variable building heights depending on consumption patterns, location and logistics. In past FSI was acting as the tool to limit the congestion in Mumbai, but under the new plan it is designed primarily to be a tool to manage physical development of Mumbai by laying out uniform rules, so that each and every location in Mumbai can provide good connectivity with other parts, said Aashiesh Agarwaal, an analyst at Edelweiss Securities. The more he added that now we are seek to address key lacunae impacting Mumbai’s real estate sector.

Real estate developers are stepping in right direction and its positive sign with strong governance, brand and execution capabilities. Most of the proposals are available for public comments after which final regulations will be released, which could be as late as end-2015. The S&P BSE India Realty Index has noticed the growth of 15 per cent in 2015 whereas; compared with the benchmark S&P BSE Sensex its 7.6 per cent gain. However; the Oberoi Reality which is country’s second-largest real estate developer by value climbed 13 per cent in the period while Godrej Properties added 16 per cent.

Property prices in Mumbai

According to few reports, property prices will remain high in certain market conditions, but they will not increase any more. The value of under construction property which is unsold in real estate inventory in Mumbai can be anything as its R 53,400 crore for a clutch of listed firms and it presents that consumer confidence isn’t exactly soaring. What can be worse with an additional R36,800 crore of launches in the area of 20.4 million sq ft, which is more than half of south central part of the city and it can put the prices of real estate industry under pressure.

According to Niranjan Hiranandani, co-founder of Hiranandani Developers, in real estate market pricing strategy is now crucial since only relatively affordable projects are able to find takers whereas; high end properties in the central and southern parts of the city aren’t seeing any specific interest. Ghulam Zia Executive Director of  Knight Frank India, stated that first-time home buyers continued to sit on the fence however in recent budget there are no incentives for home buyers the market will get revitalized only once the RBI (Reserve Bank of India) begins to cut interest rates.

Analysis of Kotak Institutional Equities (KIE):

According to analysis of Kotak Institutional Equities (KIE) the numbers are clearly indicating that says land buying has dropped and prices are not going so up as only there are four or five developers have the capacity to buy land worth more than $200 million. The analysis showed that Oberoi Realty, Peninsula Land, Sunteck Realty, Godrej Properties, HDIL, DB Realty and Indiabulls real estate are among those property developers who are sitting on high inventories and major part of those inventories belongs from Lower Parel, Worli, south and central pockets of Mumbai and Prabhadevi.

Ambar Maheshwari, CEO of Indiabulls Group also believes that there is a glut at the premium and high ends of the real estate market. The more he added that a recovery is unlikely in areas like Lower Parel and Prabhadevi unless developers build smaller apartments that result in some kind of rationalization in prices. In present Oberoi Realty is targeting on the sales of unsold inventory and they are expecting to sale it in next 12 months, but KIE expects the company will only be able to sell R8,500 crore worth of residences in the next 30 months. As per the data issued by the Director General of Mumbai, in the first 11 months of 2014, property registrations fell 2.4 per cent.

As per few reports developers are planning to offer discount after definitive interest from buyers and channel checks suggest that large number of units are being sold in the 20:80 schemes which will be without a bank debt burden to and trip abroad for designing apartments however discounts are becoming more evident as real estate developers are also offering absolute discounts to investors and as well as end buyers now. These measures are clearly failing to impress and attract new buyers. In certain real estate market, in certain markets developers are selling 20-30 units in a month while in others they could be selling in 2 to 6 a month. Amit Bhagat, who is CEO & MD, ASK Property, stated that the demand was tepid in the luxury space so any developer who was leveraged might be under pressure.