In July 2020, I visited the L&T Seawoods project at Navi Mumbai. Unlike the sales staff's eagerness one is accustomed to witnessing, there was complete nonchalance in seeing a prospective homebuyer walk in at this project.
The reason was simple: The project was sold out with little effort. A few weeks later, I bumped into a home buyer who had booked into the L&T Seawoods project and thereafter cancelled. His reason: with the same budget, he opted to swap his under-construction apartment purchase at L&T Seawoods in Navi Mumbai with a ready apartment purchase at L&T Emerald Isle at Powai in Mumbai.
Prices on the rise
Welcome to the satellite city of Navi Mumbai – where prices of homes are challenging prices of even the Mumbai real estate market. While prices in Mumbai have been sluggish and trending downwards, prices in this market have been steadily on the up-move. Today, prices in the region are on par with locations like Lower Parel in Central Mumbai, and are not far from the rates for older buildings at locations like Bandra or Peddar Road.
The ticket sizes are not small either. It is not uncommon to see projects command a pricing of over Rs 5 crore at the famed Palm Beach Road – or the Marine Drive of Navi Mumbai. Moreover, this pricing is largely demanded by local players who have little or no presence outside the city. To residents outside this city, the price levels that have been attained in this laid-back and sleepy market may appear as bizarre. The question then is - Why this narrowing of the gap in prices between Navi Mumbai and Mumbai?
At a simplistic level, one can argue that prices in the commercial capital had sustained at unrealistic levels for long and it was only a matter of time that they corrected. On the other hand, it is no secret that supply of housing in Navi Mumbai has been well-controlled to permit absorption. In an equity market analogy, Navi Mumbai is a thinly traded stock that is priced at a high valuation.
Superior governance in Navi Mumbai
At a broader level, there is an argument that there is superior governance (relatively) in Navi Mumbai as compared to Mumbai. The governance is backed by sound financial resources as well. Hence, while the population of Navi Mumbai is a meager 1/11th of Mumbai, the budget of the Navi Mumbai Municipal Corporation is almost 1/5th that of the Mumbai Municipal Corporation.
Yet if there is one player that can spoil the party for Navi Mumbai real estate, it is the developer. Readers of this column will know that I suspect every builder who uses terms like ‘saleable area’, ‘built-up area’, ‘super built-up area’ etc (instead of carpet area). Almost every developer in this market still uses those archaic terms and hence I am wary of their practices. Even the marketing content and presentation are shallow and akin to the rudimentary standard one earlier witnessed in Mumbai prior to Lodha Developers revolutionising it.
But those are small concerns in the overall scheme of things. The big worry is that Navi Mumbai developers may be making the same mistakes as builders in Mumbai. Enthused by a strong response at elevated price points for a small sample of units, developers inferred that the benchmark price for housing could steadily be reset at a substantially higher level. This new benchmark price drove some of the most bizarre land value transactions in Mumbai as well as government temptation to adjust ready reckoner rates accordingly. Boxed into an elevated cost structure, it meant developers needed to price their products at a high level for a large volume of units – to cater to a market size that merely didn’t exist. By the time it unraveled in 2020, the damage was widespread.
Witnessing the recent land auctions conducted by CIDCO in Navi Mumbai and the bid values being thrown up by builders – gives one the feeling of the actions of Mumbai developers almost a decade ago. Bids have attained levels that are in striking distance of land values in prime belts of Mumbai. Ajay Punjabi of Bluekey Realty cautions that “as the region is growing well, the land pricing should not get ahead of itself. That will result in higher selling prices of apartments, offices and retail units. Affordability is a necessity to attract and build a vibrant market.”
Affordability is a necessity
There is an argument that as long as authorities keep supply restricted, the show can go on. It is a legitimate claim. But as one witnessed with Mumbai, after a certain price point is scaled and unaffordability kicks in, it is the beginning of a tough road as sluggishness kicks into the primary and resale market.
There are many things that Navi Mumbai does better than Mumbai in governance and administration. Its developers should learn from the mistakes of their peers in Mumbai. It proved costly for Mumbai developers. It may prove the same for those in Navi Mumbai.