In April 2004, a friend who lived on Carmichael Road in South Mumbai, one of India’s most expensive streets, decided he needed a new home.
The presence of illustrious neighbours such as the Reserve Bank of India governor, the Bombay Port Trust chairman, and the Municipal Commissioner was not enough to keep him there.
The family had expanded, putting a squeeze on their two-bedroom apartment. Additionally, it was a standalone building without any amenities.
The posh neighbourhood provided a distinct advantage, though – the property rates there were astronomical, making South Mumbai an oasis of wealth. A young or middle-aged professional with a thriving career would hardly be able to afford to live in South Mumbai.
However, capital wasn’t the only issue. There were other constraints – like food habits. Some of the richest pockets were predominantly vegetarian and they kept out those with other dietary preferences.
At that time, a major transformation was under way in Mumbai. The industry that had driven India’s textile boom was in the doldrums. Mills that were largely located in the thorny parts of Central Mumbai were shut and went bankrupt. But they had one thing of immense value – land.
One company, Peninsula Land, embarked on the transformation of one mill plot into a grand project called Ashok Towers in 2004. The friend had a swap opportunity – sell his apartment and buy three spacious apartments in the new complex.
He considered the option but was reluctant to leave South Mumbai. So he did what most homebuyers do – he waited. Five years later, with the project in sight, he visited again. The prices had risen sharply. Now his apartment would fetch him only two apartments at Ashok Towers.
The hurt of missing out made him wait for a better price. That never came. And grudgingly, in 2013, he replaced his compact apartment in the flashiest neighbourhood with a larger, three-bedroom apartment in a new township.
In a way, this story epitomises the biggest trend in Mumbai’s real estate sector over the past two decades: The stagnation of South Mumbai and the surge of the suburbs and other areas.
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Locations once considered inferior or far flung – or both – now have their moment in the sun. Today, property rates in several projects in such areas are on par with those in South Mumbai. How did that happen? There are multiple reasons for this phenomenon:
1) The rise of Bandra-Kurla Complex as the Central Business District
It’s hard to imagine it today, given how desolate and sleepy South Mumbai is, but just more than a decade ago, almost every key economic activity had its centre in South Mumbai – from banking and finance to the diamond sector. It’s complicated to relocate an entire ecosystem, but in one of the most fortuitous and inspired sets of actions, it all happened. Bandra-Kurla Complex in North Mumbai became the hub.
Today, rates in Bandra-Kurla Complex are 75 percent higher than those at Nariman Point in South Mumbai. It wasn't the only new economic hub – many smaller vibrant hubs were created. Instead of employees going to the office location, the trend of offices going to the employees started.
2) Big land, big projects
As there was limited development in areas outside of South Mumbai, the availability of empty land was an opportunity. This fostered the beginning of township projects bundled with amenities such as swimming pools, gyms, and gardens that attracted families stifled in standalone buildings. South Mumbai, meanwhile, had little space and appetite for fresh development.
3) New wealth, same locality
With the growth of India’s economy, wealth was distributed across the board. Prosperity made people want to upgrade – but they didn’t want to leave their locality. Hence, they looked for a quality project in a superior section of that same locality. Even if they wanted to venture into South Mumbai, affordability was a big challenge
4) The rise of professional developers
It is not a coincidence that a majority of township projects have been executed by top-tier developers – many of them with limited experience. In an era where Mumbai’s real estate thrived with some not-so-credible developers and little thought for masterplans, township projects would have almost certainly failed. Regulatory support provided a level playing field and allowed the rise of professional developers in Mumbai.
Does this mean the story of South Mumbai is over? Far from it. In a contest between similar projects in South Mumbai and other parts of the city, the South Mumbai property will have a higher value. The most valued transactions still happen in that market.
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Top companies may have shifted out of South Mumbai to other economic hubs but their top executives have not relocated their residences. There is a certain planning, legacy and discipline in South Mumbai that does not exist in the suburbs, irrespective of the quality of projects developed by builders.
In the end, the story of the decline of South Mumbai and the rise of the suburbs is driven by the simplest factor in real estate: When supply gets crunched and affordability goes out of control, a vibrant ecosystem forms elsewhere.
South Mumbai shut the door and after a while, no one knocked.
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