Sold for Rs 21 cr: Don't get fooled by Borosil's record buy of sea-facing Worli flat

In June 2013, a sea-facing duplex in Worli’s opulent Samudra Mahal building was sold for Rs 1.18 lakh per square foot to leading glassware manufacturer, Borosil, making it the second-most expensive real estate deal in the country.

Two months later, flushed with funds, Borosil has broken its own record and bought another sea-facing apartment in the same building at Rs 1.23 lakh per square foot, making it the highest real estate deal in India.

The company has reportedly been loaded with cash ever since it sold its 18-acre factory at Andheri (East) for Rs 830 crore to Neepa Real Estate, a subsidiary of Sheth Developers in 2010.

A Times of India report says Borosil bought the 1,706 sq ft, three-bedroom apartment for Rs 21 crore from Behroze Zavaray Poonawalla, sister-in-law of Cyrus Poonawalla, who runs one of the world’s biggest vaccine-makers and is also a race horse owner.

Amenities in the building, however, just include a swimming pool, health club, children’s play area and a garden.

So why does a building that does not offer ultra-luxury services command such a high price?

As Firstpost has pointed out earlier, such a high-value deal does not mean that prolonged slump in India’s real estate market is over.

In fact, such deals are just one-off and such flats in prime localities will continue to fetch premiums since the supply of luxury penthouses and duplex apartments in landmark buildings is restricted.

Also, Worli is one of the prime localities in Mumbai which helps developers get higher revenues as compared to the national average. However, in the last one year, rentals even in this prime location have actually fallen. While a 2BHK in Worli could fetch at least Rs 1.50 lakh a month as rent, today they are getting only Rs 1.25 lakh to Rs 1 lakh.

Another report in the Economic Times last month said rentals in marquee buildings like the sea-facing Haveli on Malabar Hill, NCPA Apartments at Nariman Point and Maker Towers at Cuffe Parade, where rentals range between Rs 5.5 lakh and Rs 12 lakh a month, are down by up to 30 percent.

When rental yields do not appreciate in proportion to the capital value, it means the property is overvalued.

In fact secondary sales in Napean Sea Road, one of South Mumbai’s posh localities, are being conducted at Rs 50,000 a square foot in the from its peak of Rs 80,000 last year.

This slowdown in rentals reflects the visibility of moderation in capital appreciation of luxury projects, which is why one shouldn’t be fooled by such record deals.