On December 29, 2022, Bollywood actor Sonam Kapoor sold her apartment in Sunteck’s Bandra Kurla Complex project for Rs 32.5 crore. This is one of India’s most exclusive residential projects in one of its most expensive locations, which also has owners like Uday Kotak and Gautam Adani.
Kapoor purchased the same apartment in 2015 for Rs 31.5 crore, which means the apartment delivered a meagre return of 3 percent over seven years. The government-mandated price (ready reckoner rate) for the apartment is around Rs 16 crore.
This is not a distress sale as the pricing in this project has hovered in that range, although it is a sale at a discount. Data from the real estate intelligence platform Zapkey shows that the price is 11 percent lower than the average transaction price in the building over the last six months. The discount can partly be explained by the fact that her apartment is on a lower floor in a city where apartment prices rise with each higher floor.
If the purpose of purchasing the apartment was investment, it turned out to be a bad one. Parking that money even in a fixed deposit (FD) would have earned Kapoor Rs 46–48 crore. If Kapoor had invested in a Nifty 50 index fund, she would have earned almost Rs 70 crore. If perchance, she’d bet the monies on the scorching Adani Enterprises stock, she would’ve netted a cool Rs 1,900 crore.
I don’t know Sonam Kapoor and have no idea about the rationale behind her purchase. Perhaps it was for end-use or maybe she already had enough capital deployed in FDs and equities. This episode is important for another reason. It counters one of the myths that’s constantly been propagated by brokers and builders over the decades. That is, property prices in Mumbai only keep rising. At worst, they remain stagnant. In that alternative universe, real estate is a market that witnesses no decline in prices. Equities and bonds may fall, crypto can collapse, SRK and Aamir Khan’s fees can decline, Virat Kohli’s endorsement rates can drop, but not Mumbai real estate.
The reason for this narrative needs no investigation. Brokers earn their commission from builders and hence have to read from a script. Builders are compelled to sell real estate as an investment story after years of price inactivity and stagnant prices and are loath to admit that prices can go down for fear of home buyers delaying their purchases. Which home buyer will make a purchase today if he thinks the price will be lower 12 months hence?
Homeowners, on the other hand, are a fragmented bunch without a voice or platform to share their stories. Even if they do, often the emotion of owning a home makes one reluctant to highlight the weakness in the purchase.
In that regard, details of this deal by a high-profile celebrity are welcome. Kapoor is just a symbol, but it is likely that a majority of buyers who have bought apartments between 2013-2018 will notice that the value of their apartments is lower than the price at which they bought them. Unaffordable pricing by debt-driven builders drove inventory to record levels, causing price declines across several markets.
In all fairness, this is a healthy trend and shows the maturity of the market. Prices will go up and down depending on numerous factors that vary according to the location and the project. To deny that is to set the stage for buyers to be disappointed, as it happened in the last decade.
Kapoor may have had a marginal movie career. But this episode may have a disproportionate impact on Mumbai real estate if it sparks a sustained debate on expectations in property investment.