Can Thane’s home prices ever rival Mumbai’s?

In a messy divorce case, the man and the woman traded various nasty allegations. The man alleged that the woman misled him from the very beginning. He thundered with a tinge of snobbishness that “she said that she is from Mumbai. But she lied. She was from Thane.” For those not familiar with the geography of Maharashtra, Thane is to Mumbai what Gurgaon is to Delhi. Where Mumbai ends on one side, Thane starts. The man’s mind was clear. Mumbai has high property rates and therefore the residents are wealthy. Others pale in comparison. The conclusion is not untrue but the ground is changing.

I was reminded of that decade-old episode after visiting a few housing projects in Thane last week. One project offering in particular, Sheth Zuri, stuck out. Its quoted pricing was almost on a par with a project by the same developer in Mumbai. It’s not the only one. Word on the street is that prices of the upcoming Thane offering of Oberoi Realty will match those of its Mulund project in Mumbai. Prime locations in Navi Mumbai have been priced higher than several locations of Mumbai. It made me think about a trend that is slowly picking up. The default setting of a Mumbai home automatically commanding a premium just by being in ‘Mumbai’ is eroding.

How did this happen? It’s a combination of several uniting factors:

1) Decentralization of economic activity: There was a time around two decades ago when all key economic activity presided primarily in South Bombay at locations like Fort, Nariman Point, etc. That ensured the surrounding areas fetched a steep premium whereas all the distant others languished. New business districts were later created elsewhere, bringing several other locations into consideration.

2) Connectivity: It is undeniable that infrastructure connectivity has been inadequate in the Mumbai Metropolitan Region. It is also equally undeniable that there has been a degree of improvement. That has meant the workforce is able to stay in distant areas and yet travel to their workplace.

3) Quality of projects: There is no market where top developers are slugging it out in the manner that is happening in Thane. The availability of large parcels of land has allowed developers to enter this market with competitive and credible offerings. Given the availability of land, almost every project offers social and recreational amenities like a swimming pool, gym, banquet hall, walking track and the like. Indeed, the choice for many has now come to mean a small apartment by a local developer with no amenities in Mumbai versus a bigger apartment by a branded developer with amenities in Thane.

4) Familiar surroundings: Housing is often local. There is no empirical data on this but it is believed that three-fourths of all demand for a new project is sourced from nearby areas. That means homebuyers will prefer to upgrade within their own locality than relocate into a different micro-market—even if the other micro-market is perceived as being more upmarket.

5) Market being project-specific: There was a phase when the price gap between a good building and a hideous building on the same street was marginal. Location was everything. Today that phenomenon hardly exists. Projects matter. Hence, it’s not uncommon to see the price gap between two buildings next to each other be as high as 25-30 percent. Quality offerings are able to demand a premium while poor projects are discounted.