Mumbai Real Estate in 2024: Birth of the Rs 2 lakh/sq ft home

2023: Weak year for affordable housing due to high interest rates; Mid-level steady, Premium strong, Super-luxury dominates with record-high price points.

As we get started in the new year, it’s important to take stock of the year gone by as well as the outlook going forward. Notwithstanding the strong optical registration numbers, 2023 was a weak year for affordable housing projects as high-interest rates hit demand. Mid-level housing was steady. Premium and luxury were strong.

But the year truly belonged to the super-luxury housing market. Price points and ticket sizes reached unprecedented levels. Prices hovered at close to Rs 1.5 lakh/square feet for select projects.

In 2024, I believe the trend in super-luxury will continue. And we will see the birth of homes priced at a new record of Rs 2 lakh/square feet. While the prices may appear obscene for a low per-capita income city like Mumbai, the dynamics in the niche super-luxury segment are radically different. This is a segment with discriminating tastes and hordes of money to back it up. They had the money before as well but lacked worthy options.

That’s because until recently Mumbai real estate was the ultimate compromise for a buyer. If you had the location and surroundings, you didn’t have a quality project. Example: Bandra. If you had the project and sea views, then you didn’t have the surroundings. If you had all of that - then you didn’t have a credible builder involved. If you had all of that then the project was either a slum redevelopment project or a public parking scheme-driven project. Lodha Malabar was the first to break this compromise.

It won’t be the last. A combination of liberalising Coastal Regulation Zone norms and massive wealth creation for the 0.001 percent league will ensure deals that will exceed even Lodha Malabar. What will it take for a project to attain the Rs 2 lakh per square feet pricing?

Sea-facing development: Mumbai builders are notorious for advertising their projects as ‘sea-view.’ It often basically means that from some small corner, you get a fleeting view of the sea. To attain record pricing, the project must be sea-facing and not just have a sea view.

Location: Not all sea-facing projects are the same. They need to be in the right location. And today’s super-wealthy of Mumbai want three locations in particular. It doesn’t include the famous Marine Drive – which anyway has regulatory curbs on development. The two locations will be the strategically connected Worli, vibrant Bandra or the peaceful Malabar Hill.

Branded developer involvement: I have low regard for the soft skills of most ‘branded developers’ who have yet to upgrade their skills in dealing with top-end clientele. But seven builders have demonstrated the potential to scale up their game or course-correct from their past follies. These Super Seven will be the ones that have a chance to break the price-point record.

Open plot development/Gentry: A prime drawback of a typical redevelopment project along the sea is that the eventual gentry may be a mixed one. It will comprise the old rich who may or may not be in the top league today. Hence, a project on land fully acquired by a builder with no redevelopment obligations will have a far superior opportunity to attract the super-wealthy.

Floor plate with decks: Gentry is important but too much gentry is a problem in super-luxury projects. The preference for privacy trumps community. Hence, the project must have large floor plates with one apartment per floor. And yes, a balcony is a must to soak in the sea.

Several other finer points like elevation will play a role as well. At the moment it appears that the first one to break into that league will be Rustomjee’s sea-facing project at Bandstand. Irrespective of its future projects, there is negligible possibility that even a decade from now any other project will outdo the Bandstand opportunity for the company.

Eventually, the steep pricing will be commanded by less than five projects in Mumbai. But it will demonstrate the willingness of Mumbai’s super-rich to pay a disproportionate premium for projects that meet its discriminating taste. When the builders complete the project, they will need to demonstrate that it was worth it.