Adani Realty has won the bid for undoubtedly the best piece of land in Mumbai. The new whale of the real estate market outbid L&T Realty to secure a 24-acre land parcel at Bandra Reclamation. Every piece of land invariably has a weakness. The one acquired by Adani is an exception.
1) Size: The best locations in Mumbai always have small plots of land available for development. This scoop by Adani is different. It is 24 contiguous acres that will alone provide a wide list of amenities to a sizeable community.
2) Bandra: It is the hottest location in Mumbai due to its proximity to major economic hubs like the Bandra Kurla Complex or BKC and Lower Parel. But that’s just not all. It’s a neighbourhood that has a ‘vibe’ and ‘soul’ different from anything else in Mumbai.
3) Sea-facing: Mumbai has many sea-view buildings but very few sea-facing buildings as a host of regulations had blocked that opportunity. No longer, as sea-facing opportunities have opened up with the liberalisation of norms governing coastal areas.
4) Road connectivity: The only disadvantage of Bandra is that its prime sea-facing locations are in the interiors of the suburb. It takes time to navigate the traffic congestion to reach your destination. The sea-facing plot secured by Adani Realty is at the outer edges of Bandra with outstanding road connectivity.
5) Clear land: The best plots of size in Mumbai are largely encroached by slums, a significant hurdle to commencing work as demonstrated by the poor record of slum redevelopment projects. This plot by Adani is clean with zero complications.
Adani Realty, I suspect, will never again get a similar opportunity. It has the canvas to create a landmark project. That canvas, however, may disrupt the pricey neighbourhood of Bandra-Khar-Santacruz. That market has seen an exuberant bidding war as most developers jump over each other in securing small parcels of land in mediocre locations. That has meant higher costs as excited builders offered greater incentives to societies for winning the bid. There are more redevelopment projects underway currently than there have been in the past decade.
That triggered the inevitable. Sales started slowing down as buyers of luxury homes had numerous options to evaluate before making their purchase decision. Moreover, in small parcels of land, real estate is more a commodity than a product with little differentiation. There is nothing inherently ‘luxurious’ about it. It is positioned as ‘luxury’ only because it is located in an expensive market. Buyers now have a choice between Redevelopment Project A and Redevelopment Project B. It seems imminent that soon it will be Adani’s project versus many Redevelopment Projects as they both target the same customer.
The area Adani Realty is permitted to build under the rules is over 40 lakh square feet. Given the location, it is certain that at least half that potential will go towards residential development. That implies Adani on an average has scope to construct a whopping 2,000 apartments of 1,000 square feet each. This in comparison to the average redevelopment project that has 20 apartments to sell in the open market. All the supply will not come onstream at one go. But even if it is staggered over a seven-year period, that means a supply of 300 units annually. This, in a market that last year saw primary sales of 684 units, according to data from online property consultancy Zapkey.
Going by historical evidence, Adani Realty wants to play the big game but wants to play it fast. It will chase velocity through a mix of a) premium, luxury and ultra-luxury offerings similar to Lodha World Towers and Lodha Park; b) it will start at an attractive price point and then raise it rather than the common method of developers pricing it high and then discounting.
What should the competition do? There is a window before the action begins but I will hesitate in assuming a long window. I reckon if developers don’t reach a safe zone before the launch, their projects will not survive. They should sell out before the big hungry whale opens its mouth.
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