You have probably never even heard of the company. An entity in Mumbai is embarking on arguably the most daunting project of this decade – the tallest building in India with a height of 312 meters and 81 floors. It’s a company called Man Infraconstruction: a contractor turned real estate developer. A developer whose projects have a respectable standing in one of the Eastern Suburbs of Mumbai.
Tall buildings are a risky bet but aiming to go for the tallest tower – has been the graveyard of companies and nations. Since 1907 the country that set out to construct the world’s tallest building has seen a recession by the time the building is complete. The US saw the Great Depression when its top heavyweights embarked on a Race to the Sky in 1930. Similarly, the Petronas in Malaysia saw the Asian Financial Crisis in 1997. Burj Khalifa derives its name from the man who rescued debt-stricken Dubai in 2009: Khalifa Bin Zayed, the ruler of Abu Dhabi.
India is far from having structures that are on the list of highest skyscrapers. The most famous Indian building to make the headlines was The World Towers by Lodha. Its height: 1/3rd the height of the Burj Khalifa. Even that was too high with Abhishek Lodha candidly confessing that it was ‘foolishness’ to embark on such a project.
That's because it costs over 70% higher to construct a 60-floor building vs a 20-floor building. Simply put – the cost to construct a tall building in comparison to a short building isn’t merely the cost of constructing additional floors. It changes the complete dynamics from the quantum and grade of steel and concrete consumption to the number of elevators. Beyond that is the silent but giant killer component: Debt. And expensive debt if you are an Indian developer. Taller buildings take longer to complete thereby increasing the duration of repaying expensive debt and surviving high interest rate regimes. The world’s tallest buildings are often planned for vanity but get stuck in reality and eventually get complete without profitability.
So why is a company that has been in the property business for a decade bucking all evidence and going for a curiously designed super-tall building? Last week I met the young 31-year-old Manan Shah of MICL to understand that. I got the impression of an ambitious man who believes his family’s 50-year-old company has not got its fame for the quality and quantum of work it has done. He’s not wrong. Some several developers and lenders posed the question “MICL who?” when hearing about the initiative to go for India’s tallest building.
He's not daunted by the challenge of going tall. He brushes aside my warning that super-tall buildings are a recipe for disaster in an environment where rules are flexible and judicial activism is possible. “I have always started my projects only after all approvals and permissions.”
Even with the necessary approvals the big challenge for even the biggest players is the execution by contractors. Oberoi Realty pointed to this weakness to highlight the gap in his slow-moving Eastern suburb project. This is the part where Manan comes to life saying “My biggest strength is that I am a contractor first and then a developer. I have zero dependency on external contractors to get the job done.”
Will he be able to get demand for his million-dollar homes? The project is in the wealthy location of Tardeo in South Mumbai. However, the surroundings of this project are modest. In that scenario how does one fund the expensive project? Manan isn’t perturbed by the thought of debt because he doesn’t believe he will need much of it. He claims that “the sales velocity indicators are strong while our initial investment is higher. We are not going to be much debt-dependent.”
I will be surprised if the optimism on sales velocity materializes. For one – MICL is an unknown brand in the South Mumbai market that is anyway seeing little migration and interest from outside.
Meanwhile, the pricing at current levels of Rs 60,000 per square foot leaves little scope for investors to get in. Secondly – luxury homes even by top brands largely sell at advanced stages of completion as that buyer is comfortable paying a premium but wants certainty of delivery. Skyscrapers in Malaysia and Indonesia worked largely as they were able to source demand from other geographies. In India, that’s a negligible prospect. Thirdly – The possession date for this project as per RERA is December 2030. It will need a persuasive sales pitch or an unmatched product and payment plan, for buyers to bite early into the project.
Irrespective of these concerns, this is arguably one of the most important projects for Mumbai. If it succeeds – the company will break into the map of Mumbai real estate. But importantly it may set the stage for the rejuvenation of an industry that has forgotten to dream.
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