A few days ago, Boman IraniCMD of Mumbai-based Rustomjee Group, also known as Keystone Realtors, said he is not losing sleep over new real estate developers from other cities looking to enter the redevelopment space in the financial capital. Rather, he sees it as an advantage because “they bring with them a healthy competitive spirit.”

“I’m not losing any sleep over this because there are a lot of developers who want to get into this space. The size of the old building redevelopment market in Mumbai is so huge that there is no shortage of opportunities. New players will add value to the redevelopment space in Mumbai. he recently declared during a call with investors.

“I see that as an advantage because they bring with them a healthy competitive spirit. And quite honestly, it’s better to have large, well-capitalized developers entering the same space so there’s no knee-jerk reaction,” he declared. .

Over the past decade, at least half a dozen real estate developers from Bangalore have expanded their presence to Mumbai. Several companies such as Bengaluru-based Prestige Group and Puravankara have entered or announced their foray into the Mumbai real estate market.

But why do developers want a piece of Mumbai’s real estate market? This is mainly about expanding and consolidating their presence in cities, real estate experts said.

The expansion pattern is more evident among listed property developers than unlisted or mid-sized real estate agents in these cities, experts say.

Better margins and high sales velocity attract developers to Mumbai

Bangalore-based Puravankara Limited entered the Pune market in 2017 and the Mumbai market in 2021. The company has been in expansion mode in Mumbai and Pune for the past few years. The company also aspires to have a significant portfolio in the commercial segment in the Mumbai and Pune markets.

Read also: Puravankara buys 12.75 acres of land near Mumbai; develop a housing project with an income potential of ₹4000 billion

“The Mumbai real estate market is a natural fit for expansion for several reasons. The first reason is that the Mumbai Metropolitan Region (MMR) is the largest market in the country and its size is almost equal to that of the entire country. South Indian Real Estate Market Secondly, MMR offers products in price segments ranging from ultra-luxury to affordable housing, thereby enabling a wide range of products,” said Rajat Rastogi, CEO – West and Commercial Assets, Puravankara Limited.

“As we speak, the Puravankara residential real estate market in Mumbai and Pune has around 4.5 million sq ft under development, which includes several projects in Mumbai and Pune. We are planning to launch six to seven projects in Mumbai and Pune over the next month “We are also planning to develop a large commercial real estate portfolio in Mumbai and Pune. So, we not only have a presence but are also expanding deeply in Mumbai and Pune,” Rastogi said.

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

The company has a pipeline of 30 projects, including three in Mumbai and 17 in Bangalore.

Read also: Prestige Group plans mid-range housing projects in Thane, Panvel, near Mumbai

A Mumbai-based developer, who did not wish to be named, told HT.com that he had launched a project in Pune despite having a healthy portfolio in Pune. Bombay. “What I can earn by building one square foot in Mumbai, I will have to build 20 square feet in Pune. So, it makes sense for listed players to enter the Mumbai market. Small and medium sized developers should continue to work in their home turf, Mumbai,” he said, adding that being the financial capital, it puts you at a different scale and price as there is a demand for luxury accommodation.

Read also: Bangalore tops the list of cities with the highest rental yield of 4.45% in Q1 2024; Mumbai second with 4.15%

A lucrative business proposition

According to Ritesh Mehta, Senior Director & Head – West, East & North India, Residential Services | Developer Initiatives, the redevelopment opportunity opened up in prominent locations like Juhu, Bandra, Malabar Hill a few years ago and is a lucrative proposition for developers in other cities. This is a high margin but low volume business.

Southern developers are interested in high margins. The minimum price for these projects starts at around ₹25,000 per square foot in Mumbai versus maybe ₹7,000 to ₹10,000 m² here and it is therefore more lucrative for these developers to launch projects in the financial capital. A few developers from South India have launched projects ₹35,000 per square foot a few years ago and are now planning to launch new projects at around ₹70,000 per square foot.

“They started with mass housing on the outskirts and are now launching luxury projects in the heart of the city,” he said, adding that it is not an easy task to launch projects in Mumbai.

“It takes time to get approvals, convincing old tenants of a project is not an easy task. And yet, despite these challenges, viability and returns are higher in Mumbai and that is what keeps them here,” he added.