Explained | What the Radhakishan Damani deal means for Mumbai’s real estate market

Such mega-deals of Rs 1,000 crore are usually one-off, aspirational transactions, which do not reflect market trends, particularly when the city is battling the second wave of the pandemic and stamp duty concessions have been withdrawn, but experts say there may be deals of more than Rs 100 crore from time to time.

April 07, 2021 / 05:26 PM IST

In one of the biggest property deals in Mumbai, DMart founder Radhakishan Damani and his brother Gopikishan bought a Rs 1,001 crore independent bungalow, Madhu Kunj, in Mumbai’s posh Malabar Hill area on March 31, 2021.

The building, spread across 5,746 sq m, was registered a day before the concessional stamp duty of 3 percent would rise back to the normal level of 5 percent, which helped the buyers save Rs 20 crore.

The Maharashtra government on March 31 said it would not extend the stamp duty concession and the normal rate would be charged in fiscal 2021-22.

Here’s a look at what the deal means for the Mumbai market and whether such ‘marquee’ deals will be the norm going forward.

Will the Damani deal signal a resurgence in the Mumbai real estate market?

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This was a ‘one off’ and an ‘opportunistic’ deal, which means transactions of this magnitude takes place once in many years. A comparable deal in 2015 was the Rs 750 crore purchase of the iconic Lincoln House in the posh Breach Candy area of Mumbai by the owner of biotech major Serum Institute of India, Cyrus Poonawalla, who is the chairman of the Poonawalla group. The deal was signed between the Poonawalla family and the US Consulate that owned the property.

Besides, Mumbai primarily has luxury housing spread across vertical developments. Standalone, independent bungalows are few and far between.

As Anuj Puri, chairman of ANAROCK Property Consultants, explains, “the ultra-luxury housing sales level in cities like Mumbai, the price of trophy assets is not dictated so much by prevailing property prices as by scarcity and aspiration. There are very few such assets on the market and normal market conditions do not generally apply in such cases. As such, every deal is an independent event which does not affect other potential deals for similar assets in similar locations.”

Unlike other housing segments that may react to market pressures, these homes get traded in a the highly rarefied stratum of the ultra-rich.

What are the factors that drove the deal?

Experts say concessional stamp duty was one of the factors for the deal which involves the owner of Avenue Supermarkets that has made spectacular gains in the stock market since its listing four years ago. Stamp duty concession would have definitely speeded up negotiations, they said.

On August 26, 2020, the Maharashtra government had announced a temporary reduction in stamp duty on housing units, from 5 percent to 2 percent until the end of December to boost the pandemic-hit real estate market. From January 1, 2021, until March 31, 2021, the duty was 3 percent. The Maharashtra government on March 31 said it would not extend the stamp duty concession, and kept the Ready Reckoner Rates unchanged for the financial year 2021-22.

The Damani brothers paid Rs 30 crore in stamp duty at the rate of 3 percent, well below the Rs 50 crore they would have paid at the normal rate of 5 percent.

“A reduction of 1 percent to 2 percent is a big amount for high-value apartments,” says says Ritesh Mehta, Senior Director & Head – West India, Residential Services, JLL India.

“All in all, it was an opportune time to strike the deal but going forward, things may not be the same, especially with the second wave of COVID-19 raising its ugly head,” says Sandeep Reddy of Propstack, a real estate data analytics firm.

What could happen going forward?

The Damani deal is a large transaction and does by no means send out the signal that there will be a flurry of such deals going forward because the stamp duty waiver is over.

It is worth noting that in COVID times, several businessmen, bankers and owners of listed companies bought high-value luxury properties, clearly indicating that stock market money may be finding its way back into real estate.

In December 2020, HDFC vice-chairman and CEO Keki Mistry, had bought an ultra-luxury apartment in Mumbai worth Rs 41.23 crore. The residential deal in India’s financial capital took place as homebuyers scrambled to register properties before the deadline of the 3% stamp duty cut expired on December 31, 2020.

The same month, former HDFC Bank boss Aditya Puri’s family purchased a Rs 50 crore property in Mumbai. The unit, located in Lodha Seamont on Malabar Hill, near Raj Bhawan in Walkeshwar, is on the 19th floor and came with seven car parking spaces.

What is the Damani deal all about?

The ground-plus-two-storey bungalow Madhukunj on leafy Narayan Dabholkar Marg is spread over 1.5-acre land parcel and has total built up area of around 60,000 sq ft. Damani has bought the property from Purachand Roychand & Sons LLP, Pareshchand Roychand & Sons LLP and Premchand Roychand & Sons LLP.

The per square foot (sq. ft) rate for this property works out to the unprecedented level of about Rs 1.6 lakh per sq. ft.

This is perhaps the largest deal in terms of per sq ft as well as absolute value in several years. What is important is that this was sealed during COVID-19 and on the last date of the stamp duty waiver.

What are the trends in the Mumbai real estate market?

Real estate experts say it would be some months before new launches or marquee deals take place in Mumbai as the second wave of COVID-19 has just set in.

New launches in the luxury segment may not take place before the next two quarters, Mehta said.

While Mumbai may not see Rs 500 crore to Rs 1,000 crore deals in some time to come, it may witness transactions worth Rs 100 crore and above from time to time.

“Such properties get sold in any economic environment depending on the property, location and the buyer. Independent bungalows in any case are difficult to fund in a market such as Mumbai,” adds Mehta.

It must be remembered that in July 2020, Anurang Jain, managing director of auto component maker Endurance Technologies, purchased twin units in south Mumbai's Carmichael Residences for Rs 100 crore. The two apartments were registered for Rs 5 crore each on July 7, 2020. The price of each unit is Rs 1,57,163 per sq ft.

This transaction was finalised at the Mumbai registration and stamp duty department after it reopened for business on May 18 during the pandemic.

In one of the most expensive residential deals concluded in December 2020, the Daftary family - the proprietors of Bharat Serums and Vaccines Limited - had purchased two apartments in Carmichael Residences for Rs 101 crore. The 22-storey luxury residential building, Carmichael Residences, is located on Altamount-Carmichael Road in South Bombay.

The same month, The Motilal Oswal Family Trust, bought two uber luxury duplex apartments spread across 6,800 sq ft for Rs 101 crore in south Mumbai’s Peddar Road.
Vandana Ramnani
first published: Apr 7, 2021 05:26 pm

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