From Malabar Hill to Malad, builders swoop in to redevelop Mumbai’s ageing homes

In recent months, multiple builders have acquired development rights in India’s most expensive property market, from posh south Mumbai locations to suburban neighbourhoods. Under the redevelopment route, housing societies tie up with developers, who demolish and rebuild them as swankier towers with more apartments. Residents get larger apartments and parking lots for free, while the builder profits by selling additional flats to new buyers at a higher price.

Bengaluru-based Sattva Group, which is preparing for a Mumbai entry, has signed up for two society redevelopment projects, and is in talks with more residential societies for such projects.

“Redevelopment projects give access to prime locations in a city like Mumbai, where land is scarce. It’s a win-win opportunity for developers and the society owners, who get new homes and modern amenities as a result,” said Bijay Agarwal, managing director of Sattva Group.

Capital-efficient

The push towards society redevelopment, compared to slum redevelopment that is typically more complex and lengthy, comes at a time when developers are aggressively expanding, yet looking at agile and capital-efficient development strategies.

As per a September report by property advisory Knight Frank India, around 910 societies in Mumbai have initiated redevelopment, unlocking 326.8 acres of potential buildable area. The momentum is accelerating.

Last week, Mahindra Lifespace Developers Ltd said it has been selected as the preferred partner for the redevelopment of four residential societies, spread across 1.65 acres, in suburban Malad. The project offers a development potential of ₹800 crore. Earlier in April, it took up the redevelopment of two residential societies in Lokhandwala Complex, Andheri West, with a project value of ₹1,200 crore.

K Raheja Corp is doing several society redevelopment projects across Mumbai. Among these, the redevelopment of the Pleasant Palace housing society in Malabar Hill will be an ultra-luxury project.

Puravankara Ltd has acquired the redevelopment rights for a residential society in the upscale Malabar Hill area in south Mumbai through a subsidiary. Before that, it was selected to redevelop eight residential societies in Chembur.

Prime land source

“Redevelopment is a prime source of land in a land-locked Mumbai. Society redevelopment is a capital-efficient model and a risk-adjusted return asset class, making it attractive for both developers and investors,” said Sharad Mittal, founder of Arnya RealEstates Fund.

In September, investment manager Arnya RealEstates Fund Advisors and developer Supreme Universal said they will raise and deploy ₹1,000 crore in housing projects, with a focus on society redevelopment in Mumbai.

Society redevelopment as a segment may unlock more than 44,000 new homes in the Brihanmumbai Municipal Corp. (BMC) limits by 2030, worth a total of around ₹1.3 trillion, Knight Frank India said in a recent report. Most of this supply is expected to come from the western suburbs, with the hotspots being Bandra, Juhu, Andheri, Goregaon and Borivali.

Given that more and more developers are either entering this space or are acquiring more such projects, individual housing societies in good locations are being chased by multiple developers. This has often resulted in society members demanding more amenities and incentives from developers in many cases.

High demand

Prestige Group chairman Irfan Razack said the company will take up society redevelopment projects only when the terms are reasonable.

“Due to the high demand from developers, expectations of societies have risen manifold, making it unviable for a developer. Still, compared to slum redevelopment, it is a safer bet. So, we will continue to evaluate such opportunities,” Razack said. So far, Prestige has taken up two society redevelopment projects.

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The Maharashtra government encourages redevelopment in land-starved Mumbai by permitting higher floor space index (FSI) and streamlined approvals for developers, and mandating rules on accommodating residents to persuade them. On Sunday, deputy chief minister Eknath Shinde said the government will assess the project execution capability of builders in advance, and mandate them to set aside the rent amount for three years for residents while redevelopment is on. The Maharashtra Housing and Area Development Authority has also updated premium charges for commercial spaces and allowed payment of premiums for additional built-up area in staggered installments to ease the financial burden on developers and societies.