Mumbai’s Money Is Moving In Realty, Despite The Calamitous Second Wave In India

July 20, 2021July 21, 2021Leave a comment

Mumbai’s got money and it’s moving in realty, despite the Maharashtra government not extending the stamp duty waiver on property registrations in March earlier this year. INR 420 CR was collected in stamp duties in June 2021 as 7,850 properties were registered in the month compared to 5,640 units registered in June 2019, indicating a growth of 39 percent. However, in May 2021, INR 268 CR was collected in stamp duties due to the calamitous second wave across India – which was roughly half of the INR 534 CR collected in May 2019. Evidently, people have been buying property in Mumbai, albeit in an undefined, heterogeneous pattern.

In fact, prices have increased too, if you can call a slash in prices from a sharp 30% in 2020 to a 20% in 2021. Actor Ajay Devgan bought a bungalow in June spread over 5000 square feet in Juhu, Mumbai for INR 47.5 crore (which would have sold for over INR 60 CR easy, pre-Covid) and he paid a stamp duty of INR 2.37 crore on the purchase. A South Mumbai apartment that was priced at 15 CR went on to sell at 9 CR in the first phase of the pandemic in 2020 with the stamp duty waiver, but commands a selling price of 11 CR now. The reason for the upswing in the most expensive, not to mention glamorous city in India, is that builders and developers have smaller inventories now and they are trying to make some cash whilst the demand is still on the rise, given the pandemic has made forecasts and predictability highly unreliable and inaccurate during these times. Who would’ve thought there’d be 7,850 property buys in a strained and stretched economy, right? Even though it is not a seller’s market, the seller is making some kind of profit.

But property sells in North Mumbai are taking place in a very contrasting pattern to the realty index in South Mumbai. No, it has nothing to do with Bollywood’s residential dominance in the ‘burbs. In Bandra West, a two-bedroom apartment, measuring a 1000 square feet, that lists for INR 4.5 CR, sells at INR 4CR. Clearly the 20% drop in listing prices in South Mumbai are not at play in North Mumbai as there is a paucity of developments in the suburbs and the supply does not match the extensive demand, yet. So, the seller is more rigid with the pricing and gets whatever he/she asks for without having to conform to the South Mumbai pricing index.

Recently, the Brihanmumbai Municipal Corporation (BMC) had set off a dampener with its proposal to increase property tax by at least 14 percent based on ready reckoner rates as on April 1, 2021. Property tax rates are calculated based on the ready reckoner rates of 2015 in Mumbai and the BMC wanted to revise the rates following the current ready reckoner rate. But on June 18th, the Maharashtra government announced that there would be no change in property tax till the pandemic continued, as it did not seem fair to burden people with an increase in the tax. The announcement didn’t just come as a huge relief to home-owners and stakeholders, but assuaged buyer sentiments, leading to a spike in buys in June. It remains to be seen what the next 6 months of 2021 will bring to the realty table, and at what cost, and more importantly, will a structured buying and selling pattern emerge from it all?

This feature first appeared in Gulf News on July 20th, 2021

©Rubina A Khan 2021

Mumbai’s Realty Buys On A High | Gulf News

October 2, 2020October 2, 2020Leave a comment

One of the world’s most desirable real estate markets, Mumbai, is open for business in the new world. But, is anyone really interested in buying anything aside from essentials, groceries, masks and maybe some peace of mind under clear blue skies and warm, aureate sunshine right now? Yes, they are – and they’re buying real estate, not Chanel! Well, Chanel masks to be honest, not couture.

Mumbai’s realty buys are on a momentous high, never mind all the financial despondency that’s engulfing the world. Who are these cash-on-deck people with the flux of money that are buying in such an indeterminable financial climate? Not whimsical buyers for sure, as the realty business is no place for fiscal braggadocio or investment buys right now. People who have been on the market for a buy are closing deals swiftly, as are the indecisive fencers. And why ever would they not, given apartments in Worli in South Mumbai are selling at INR 6.2 CR today versus the initial asking price of INR 9.5 CR, and a 10 CR apartment is available for a negotiable INR 8.5 CR and new developments are being offered, and purchased, at INR 9.5 CR from the original price of INR 15CR in midtown Mumbai? Incredulous, but true.

“Buy land, they’re not making it anymore,” said author and humourist Mark Twain and that holds true for Mumbai’s realty buyers of high-rises built on land, and reclaimed land. During Covid19, buyers are seeking balconies and private terraces that are the new amenities today, instead of gyms and swimming pools, and if a luxe apartment has either, it’s a singing deal straight to the bank. Photographs, virtual tours and a final show-around – when everything is almost set in stone between the realtor and the buyer – but not without seriously vetting of the buyer prior – is the new order of the realty business in Mumbai.

One of the primary reasons for the astounding spike in buys is the sharp reduction in the stamp duty levied on the sales of apartments from 5% to 2% from September 1 to December 31, 2020 and 3% from January 1 to March 31, 2021 by the Maharashtra state government, as a relief measure for the real estate, commercial transport, agriculture and fisheries sector, that have been hard-hit by the lockdown over the past six months, and counting. Otherwise, the stamp duty in the state is 5% and 4% in urban and rural areas respectively, apart from the 1% surcharge in urban areas and 1% zila parishad cess in rural areas. Investors offloading their inventories in developments that they had bought high in, is also adding to the dramatic depreciation in prices across Mumbai as they’re being compelled to sell low, strengthening the buyer’s position furthermore. Mumbai’s realty business is no longer a simple or a compound process, but a variable, with only one constant that it is a buyer’s market, and has been for a while now.

Luxury rentals too, both residential and commercial, have seen a stark downswing of 20-30% reductions in the city. Residential properties going for INR 2,50,000 per month pre-Covid19 are available for INR 1,60,000 per month and a 2000 square feet commercial space on Marine Drive that commanded INR 6,50,000 per month will in all likelihood find it difficult to get even INR 4,00,000 today given the negligible human footfall in the largely residential sea-facing block.

The Kala Ghoda area in downtown Mumbai commanded fashionably high commercial rents pre Covid19 for the last decade ever since fashion designer Sabyasachi opened his flagship store in 2010. Up until then, Kala Ghoda was an arts and museum nucleus, but Sabyasachi’s arrival inadvertently turned it into Mumbai’s fashion precinct with every fashion label in India opening shop here. Despite the high rents, some adjusted, some not, designers are still holding on to their stores because of the business of Indian weddings and in a bid to stay relevant on the fashion marquee, all the while keeping the rental business in the area brisk and sharp. A 1500 square feet store here, at the end of Rampart Row towards Lion Gate, was upwards of INR 3,50,000 and is now available for INR 2,00,000 and a INR 10,00,000 per month commercial space can be rented for INR 7,00,000. Rental deposits that were upwards of six months or more are now at a flexible three months odd and the lock-in period too has gone from a standard three years to a variable one or two.

Realtors in Mumbai have struck gold during the last six months of the lockdown as compared to the past financial year because of the collapsing prices and the reduced stamp duty that is acting as an incentive, enabling and accelerating the buys. The demand for ready homes versus under-development / under-construction properties is predominant. The recent demolition of actress Kangana Ranaut’s property in Mumbai on the grounds of illegal construction within 24 hours of giving her notice of the same (the case is in the Bombay High Court) has further deterred under-construction sales. No one is willing to risk the bulldozers of the Brihanmumbai Municipal Corporation for any irregularities in their homes and prefer MahaRERA and BMC compliant properties with all the legalities in place.

With the grand realty depreciations, temptation to buy low and rent lower is rife in the city where there’s more sea than land. To quote Shakespeare, “I would give a thousand furlongs of sea for an acre of barren ground.”

This feature first appeared in Gulf News on October 2nd, 2020

©Rubina A Khan 2020

India’s Real Estate Adjusts To COVID19 Reality | Gulf News

March 27, 2020March 28, 2020Leave a comment

The COVID-19 pandemic has irreversibly changed the world order as we know it, and the economy, forever. We thought we lived in an adamantine world controlled by humans, until a contagion microbe – that’s killing harder and faster than any missile – showed us we obviously don’t. Every human and business is hurting, held hostage in quarantine in the absence of a vaccine or cure, at least not yet. Real estate too, is an altered reality.

Indian realty witnessed an unequivocal shift in perspective, long before the virus struck. The enforcement of the Citizen Amendment Act beleaguered India, leaving a trail of bloodbaths and mayhem in New Delhi in its wake, with non-violent protests across the country since December 2019 being the norm. Unsure of the future of their inherent national identities and citizenship, the unrest and uncertainty propelled some Indians and NRI’s to re-evaluate their assets in the country, in particular real estate. Sale listings went up in Mumbai, in many cases because the of very concerns related to the CAA enforcement. These listings didn’t strictly adhere to the market’s competitive and demanding numbers, but veered more towards liquidating the assets at flexible, albeit profitable prices.

Gateway of India Mumbai | Photo: Rubina A Khan

Whenever there’s financial uncertainty, buyers across the world turn to real estate as a safe harbour, but they are definitely not going to be in any rush to buy in the time of COVID-19. There has been a sharp decline in the Mumbai’s real estate market since the last quarter of 2019. Luxury apartments in mid-town Mumbai, originally purchased at Rs140 million (Dh6.6 million) in 2015 have had no takers even at Rs90 million. And this was before COVID-19. Sellers still need to sell, and buyers need to buy. But in a world that’s been shaken to its core, with no definitive answers in sight, the existing parameters of real estate will change in the days to come.

Virtual tours, an unheard of thing in Mumbai, have slowly started via FaceTime and WhatsApp, but it’s hard to say if that will become the norm. Virtual show-arounds will suffice for a preliminary showing, but to make a final decision, a physical tour is a must, particularly as the amenities are a big part of the tours. The innumerable fake listings for Mumbai properties that lure in susceptible renters and buyers, will cease to exist soon enough as the health clearance of a broker will become as vital as that of a prospective ROB (renter-owner-buyer).

Bandra-Worli Sea Link Mumbai | Photo: Rubina A Khan / Getty Images

Brokers will by default have to become photographers and videographers, health screeners and learn how to disinfect their listed properties themselves. It will become standard practice for them to call a prospective buyer or a renter before a showing to make sure that he or she is feeling fine and has no cough or sore throat, and has not been out of the country recently – even after COVID-19 is contained. A short-term effect is that buyers will be less inclined to purchase or rent if they have no idea when they will actually get to visit the properties. The long-term effects are yet to unfold, but the virus will cripple sales despite lowered prices. There is no guarantee of buyers if self-isolation, travel bans and border closures continue indefinitely or intermittently.

I don’t see a likely upswing for the next two years at least. The economic uncertainty has sparked off a growing sense of unease and doomsday panic, and is likely to cost the global economy $1 trillion in 2020, according to the UN’s Trade and Development Agency (UNCTAD).

This feature first appeared in Gulf News on March 27, 2020

©Rubina A Khan 2020

India Gets An Updated Model Tenancy Act 2019 | Gulf News

August 3, 2019Leave a comment

India’s rental housing market, trammelled by archaic laws and ambiguity, is adapting to the pragmatic ameliorations outlined by Finance Minister Nirmala Sitharaman in her inaugural Union Budget 2019 speech. Sitharaman’s proposed regulations in the Indian realty market have since made way for the Model Tenancy Act 2019, drafted by the Ministry of Housing and Urban Affairs, that addresses the relationship between the lessor and lessee realistically and fairly.

The new tenancy law limits the security deposit to two months’ rent and lists heavy penalties for tenants overstaying and not adhering to the contractual terms of their rental agreements. An overstay will cost a tenant twice the rent for the first two months, that quadruples in the subsequent months. However, during such a period, the landlords are not allowed to cut off essential utilities like water and electricity. The Act also talks about creating special courts to deal with disputes between tenants and landlords and puts the obligation of carrying out repairs, maintenance and upkeep of the property like painting on the owner. While the landlord can’t increase the rent during the middle of the tenancy contract, the tenant can’t sublet the premises without prior consent of the owner. The Act aims to increase accountability in alignment with the government’s equitable development plans in the housing sector. The Centre has left it to the states to implement the Act or to amend it in accordance with their existing rental laws.

Bandra-Worli Sea Link | Photo: Rubina A Khan

The Maharashtra government has decided to enact it for new constructions and introduce an amendment that protects properties governed by the Maharashtra Rent Control Act 1999. Landlords have domineered the rental business in India, and how, for far too long, especially in Mumbai, the only Indian city to feature in a top 20 list of expensive prime residential markets in the world recorded in Knight Frank’s Wealth Report 2019. In Mumbai, a real estate agent’s opening and closing has always been about what the owner wants, demands rather, barely skimming the surface of what a tenant wants, barring the monthly rent and astronomical security deposits. The broker is almost always submissive to an owner’s preferences, despite the tenant being as much a paying customer as the landlord. This parti pris dynamic needs to change along with the Act towards a balanced equation between tenants and landlords. Tenants need to rent and owners need their money – it’s a simple business deal and it’s about time it’s conducted like one.

The realty business in India is inescapably going to change with the Act, giving impetus to luxury rentals at the expense of buys. The biggest incentive in the rental sector is the security deposit being restricted to two months’ rent, allowing a tenant to utilise and invest the money for herself/himself, rather than blocking it with a landlord that earns interest off it. The Mumbai rental market stands to gain the most from the new Act.

Luxury rentals are far more fiscally appealing and viable with the new Act coming into play than ever before. The Act increases the confidence and security for both, landlords and tenants, getting into rental agreements aligned with the new norms, leaving minimum room for legal discord. Landlords will have to desist from imposing delusional demands on a tenant like sky-high security deposits and maintenance of the property and tenants will be legally bound to pay the weighty fines for overstay and misuse of a rented property.

This feature first appeared in Gulf News on August 3, 2019

India’s Property Market Rides Election Wave | Gulf News

June 10, 2019June 11, 2019Leave a comment

The triumphant win of Narendra Modi as Prime Minister of the Indian subcontinent for a second term, in the world’s largest election, has lent maximal credence to the country’s realty business in a manner most exceptional. The ruling government’s first term, contentiously driven by infrastructural development and financial realignments like Demonetization, RERA (Real Estate Regulation and Development Act) and GST (Goods & Service Tax) hit the cash-rich realty business particularly hard. Predictably, it was met with uproarious dissent. But, luxury realty seems to have taken a real turn since the legalized reorientations in the business, with antagonism giving way to smarts.

The luxe life is an addiction like no other. As long as there is human desire to live like royalty and be an in-your-face show-off, luxury real estate in India is headed forward. It stands at a profitable vantage point today, espousing all three acts, advantageous to both, builders and buyers. Indian realty expects investments to double to $10 billion in 2019. The paper trail and financial transparency accorded to the business is dominant, making it a streamlined, and somewhat trustworthy experience today. But there’s no denying that the business is devoid of the robustness and speed it once basked in, languishing ever so often in protracted sales.
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RERA seems to have had the most impact so far, not so much on newer developers as it has on the bigger players with large, unsold inventories, given it is now mandatory for 70 percent of the money to be deposited in bank accounts through cheques, restricting unaccounted money being flushed into the realty business. Aside from its financial transparency, a RERA requisite that’s very conducive to prospective buyers, is that builders are obliged to quote prices based on carpet area (inclusive of usable spaces like the kitchen and bathrooms) and not super built-up area. Having said that, RERA needs to hasten the pace, and frequency, in providing aggrieved buyers who need long overdue compensations from unscrupulous developers across India. The clean-up in the business has only just begun. It is anything but cleaned up, as far as realty racketeers are concerned, despite the new regulations and progressive revamps of archaic Indian property laws like Insolvency & Bankruptcy Code and the Benami Transactions (Prohibition) Act being in place. For the business to regain the implicit trust of consumers and hit immediate sale highs, compensating buyers for their losses is vital, and it should become a regular occurrence as compared to the rarity it is today.

Luxury residences and serviced luxury residences make for accelerated buys and sells in India, and rightly so, as time is a luxury the wealthy can’t afford to indulge in. Newer developers in Mumbai like Aditya Kilachand, Partner at Innovation Estates LLP, seem to be on the right beach of luxury realty, building villas by the sea in Alibag, a mere three-hour drive from Mumbai. Tapping into Alibag’s infrastructure, the improved connectivity and proximity to Mumbai, its existing community and fairly undervalued land prices is just realty forethought and judiciousness. Seven luxury serviced villas called L’Hermitage, custom-designed by Sussanne Khan of The Charcoal Project, will be ready for some serious selling upwards of 10CR by Sotheby’s International Realty India, come July 2019.
vill With all the luxury constructions and developments, there is a new shift in the market of late, that of “aspirational luxury” residences that aren’t remotely luxurious, barring their price points. Priced at 7CR upwards for a 3BHK in the business suburb of the Bandra Kurla Complex in Mumbai, these residences allude to a luxurious lifestyle with cleverly scripted and assertive marketing hype. The insides of these residential towers are at most basic, with a garden path, a swimming pool and some semblance of a gym thrown in, with views of the city’s under-construction skyline off a balcony, masquerading as luxury amenities. Needless to add, it’s a “white elephant” investment for owners as resale inventory is at its lowest and unrealistic rentals dictated by the builder’s team, with few takers, stand testimony to the “mimic luxe” gimmick it’s established on. These kind of constructions need to be reined in, as these will lead to a catastrophically high, over-priced, unsold inventory in the country that will affect consumers far more than the builders.