Luxury realty still hitting records, sea-facing duplex sold for Rs 57 cr

Even if Mumbai’s cash-strapped builders are in doldrums due to falling sales, rising inventory and piling debt, luxury real estate continues to create new records in the island city.

According to a report in The Times of India ,a sea-facing duplex in a Malabar Hill’s Darshan Apartment building was recently sold for Rs 57 crore or roughly Rs 1.35 lakh a sq ft to the Bulchandanis, a prominent business family with interests in software, aluminium and real estate, who already own three other duplexes in the same complex.

“The family’s latest acquisition (flat number 111) sits on the 9th, 10th and 11th floors of the complex’s ‘A’ wing, has four bedrooms and is spread over 3,510 sq ft. It comes with attached terraces of 1,386 sq ft on the 11th and 12th floors and a covered garage of about 700 sq ft,” the TOI report said. ( Read the entire report here ).

Earlier this year,glassware company Borosil paid Rs 21 crore (Rs 1.18 lakh per square feet)for a sea-facing flat on the 10th floor of Samudra Mahal in Worli, while in June 2012 an apartment in Tanhee Heights on Napean Sea Road, struck at deal for Rs 1.2 lakh per sq ft.

However,such high-value deals do not mean that the prolonged slump in India’s real estate market is over. In fact, such deals are just one-off and flats in prime localities will continue to fetch premiums since the supply of luxury penthouses and duplex apartments in landmark buildings is restricted.

In fact,a recent Economic Times report pointed out that capital appreciation of high-end properties in South Mumbai has dropped to 10 percent from 30 percent two years ago as it is difficult to find buyers and investors in the ultra-luxury segment in the current scenario. Even rental yields, have come down from 3-5 percent in 2008-11 to 1-2 percent in 2011-13.

Many HNI buyers and investors who look at luxury housing to enter the project at the pre-launch or under construction phase and get better rates. They usually look to sell these investments for double the price once the project is completed. However, in the current gloom, there are hardly any end buyers for such homes.

Another reason for the dearth of buys is the large number of luxury project that have sprung up in South Mumbai in the recent past.

Mumbai for instance witnessed an overall increase of 30% in its luxury homes sales during the past year, with new projects being launched in areas like Mahalaxmi, Lower Patel, Worli, Juhu, Lokhandwala and Bandra.

Data by real estate research firm Liases Foras shows that sale of luxury homes (anything above Rs 5 crore) in the last four quarters has dropped 35 percent.

While the supply of homes in this segment in Mumbai has increased by over 30% in the past year, sales have dropped because of a slowing economy, wary investors, exit of black money and high prices, says Pankaj Kapoor, MD of Liases Foras.

It should also be noted that South Mumbai has primarily been aresale property market, but now there is a lot of new supply coming in which has led to a rise in inventory even in this market as supply exceeds demand.

The World One residential project, an upcoming residential project in Worli, has seen the Lodha Group and Giorgio Armani coming together. The entire design aspect of the project is being developed by Armani Casa, the fashion designer’s studio for interior design.

Lodha is also launching another premium property called The Park, withAishwarya Rai Bachchan as the brand ambassador.

In fact US-based real estate tycoon and celebrity Donald Trump’s Trump Organisation has tied up with Lodha and the Trump Tower Mumbai will be inside Lodha’s 17.5-acre The Park project in Worli. The 800-ft, 77-storey Tower will have three-, four- and five-bedroom luxury apartments. The construction is expected to be completed by 2018.

According to Shobhit Agarwal, Managing Director - Capital Markets, Jones Lang LaSalle India, luxury housing is out of favour for investors because the project sizes are not large enough to warrant FDI or attract domestic funding.

“Today, 80% of all available capital for real estate is being plugged into mid-income housing (projects with units price-tagged between Rs 50 lakh to Rs 1.5 crore),” he said.