Luxury Housing Boom Takes a Breather

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Around 3,700 luxury apartments are currently under construction in Mumbai and its suburbs with a price tag of $1 million or more, according to Delhi-based research firm P.E. Analytics Pvt. Ltd. Of these, around 1,440 are unsold. In Delhi and its suburbs, one quarter of the 2,300 luxury apartments under construction are unsold, according to the firm. Residential apartments in India, including those in the luxury market, are typically sold before they are fully constructed. Analysts say that developers in India sometimes delay the construction of their project to ensure that they don't have a large number of unsold units in their ready buildings.

Some of the luxury apartments in Mumbai and Delhi have become 20% to 30% costlier than they were a year ago, thanks to growing wealth in India as well as general euphoria about the real estate market.

But now, "buyers are not happy with these high rates," says Sanjeet D. Narain, managing director of Mumbai real estate consulting firm Narains Corp.

At the same time, many buyers have a lot of money stuck in the Indian stock market which has fallen more than 10% so far this year. So, they want to "wait for some more time," says Aditya Juneja, a real estate broker in Gurgaon, a suburb of Delhi.

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Mumbai home prices may drop significantly from record highs

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Mumbai home prices may decrease by as much as 15 per cent over the next nine months as record high prices deter buyers, brokerage Edelweiss Securities Ltd said.

“The festival season of September-November, which typically accounts for a significant chunk of sales volumes in Mumbai, has been a dampener with tepid sales in new projects,” analysts Aashiesh Agarwaal and Adhidev Chattopadhyay wrote in a note reported on by Bloomberg.

Home registrations in Mumbai, India’s most expensive real estate market, fell to their lowest level in 20 months in November, according to brokerage Prabhudas Lilladher Pvt. Property prices jumped between 30 per cent and 70 per cent across India in 2010 with some markets surpassing 2007 record highs, Mahesh Nandurkar, a real-estate analyst at CLSA Asia-Pacific Markets in Mumbai, said in November.

Mumbai developers may be forced to cut prices to revive sales after banks cut down on credit to the sector and loans to builders became due, the memo from Edelweiss said. Development companies are facing rising borrowing costs and less access to credit after a corruption probe into loans to developers, according to Bank of America Corp.’s Merril Lynch unit and Ambit Capital Pvt.

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Alibaug calling

Now the term "Alibaug is aaya kya" is Bambaiya hindi will have a new ring to it. For the non-Mumbaikars Mumbaikars would use this pharse ('Are you from Alibaug') in a condescending way implying people who were naive, stupid or just downright clueless.

I guess now it means the rich and the super-rich. Bloomberg reports

India’s ‘Hamptons’ Lures Mumbai’s Rich, Economy Booms


The seaside town of Alibaug, founded about 300 years ago when India vied with China to be the world’s largest economy, is experiencing a rebirth as Mumbai’s growing number of rich people seek holiday retreats in the region.

About 18 miles south of bustling Mumbai by ferry, the area’s conversion into a playground for India’s rich and famous -- including billionaires Mukesh Ambani and Lakshmi Mittal, and cricketer Sachin Tendulkar -- reflects surging wealth in the world’s fastest-growing major economy behind China. India’s wealthy may almost double assets to $6.4 trillion over the next five years, Credit Suisse Group AG said in October.

Prices in the Alibaug region have doubled over the past three years, luring companies such as Peninsula Land Ltd. to build holiday retreats along pristine beaches and amid paddyfields, plantations and forests. Mumbai-based developer Orbit Corp. is among them, selling 20,000 square-foot seafront villas for 250 million rupees ($5.5 million) in a nation where the per capita income last year was 46,492 rupees.

The region is “like the Hamptons,” said Pujit Aggarwal, chairman of Orbit. “People who have spare change buy a house in the Hamptons, likewise people from Mumbai are buying weekend homes in Alibaug, which will become first homes when infrastructure improves.”

Alibaug, on the coast of the Arabian Sea in the western state of Maharashtra, was developed in the 17th century by an admiral of Shivaji Bhosle, a king who founded the Maratha Empire that encompassed most of south Asia. The town had a population of 19,491, according to a 2001 government survey.

The Hamptons is a group of upscale beachfront communities on the eastern end of Long Island, about 75 miles from Manhattan, known as a retreat for financiers and celebrities. Average home prices in the Hamptons jumped 20 percent to $1.9 million in the fourth quarter from a year earlier.

Coastal Damage

Concerns about coastal damage and disagreements between government agencies on setting up infrastructure may hamper development of the Alibaug region.

“The lack of better connectivity has already begun impacting sentiment in this market,” said Anuj Puri, chairman at the Indian unit of Chicago-based property broker Jones Lang LaSalle Inc. “Property prices have reached high levels on the power of speculation.”

A cluster of sea-front bungalows was demolished last year for breaching coastal regulations and building on agricultural land. Buyers of such land in the region must covert the land title before building homes, according to government rules.

Villagers in the region are protesting the destruction of mangroves along the coast and have filed complaints with the state government authorities.

Surging Growth

India’s gross domestic product expanded by 8 percent in the year ended March 31, 2010, from a year earlier, faster than the 7.4 percent growth pace that was forecast, the statistics office said on Jan. 31. The International Monetary Fund expects the south Asian economy to grow 8.75 percent in the fiscal year ending March 31, 2011, and 8 percent the following year.

Mumbai, occupying an area of 440 square kilometers (167 square miles), is bursting at its seams with half of its 18 million residents living in slums. Moving across the shores to Alibaug might make financial sense: a 4,000 square foot villa in the coastal town costs about 40 million rupees, a fifth the price of a similar sized apartment in south Mumbai.

“Mumbai city has hardly got any space, so we need to identify new growth nodes,” says Orbit’s Aggarwal. “Alibaug is one such growth node because of its proximity to Mumbai. It’s a good investment; once it becomes a first home, the value will jump by three-and-a-half times.”

Mumbai Boom

Home prices in Mumbai, India’s most expensive property market, have surpassed their 2007 peaks, climbing as much as 25 percent since April, according to a December report by IIFL Ltd. London-based property consultant Knight Frank LLP says the Alibaug region could well become a first home option for Mumbai residents and an extended suburb of South Mumbai in seven to 10 years if the infrastructure is improved by adding all-weather ferries and multiple jetty points.

Land prices in Alibaug vary across the region. A property with a sea view can cost as much as 60 million rupees an acre, while agricultural land in the hinterland would be priced lower at 4 million rupees an acre, according to Jones Lang LaSalle.

Peninsula Land, an Indian developer backed by Franklin Templeton Investments, and Samira Habitats plan to develop a 2 million square foot township. Three-fourths of the project will consist of luxury residential villas and condominiums, the companies said in October. Orbit is constructing villas starting at 40 million rupees and plans to develop 11 million square feet in a 200-acre gated community, while Mumbai-based Disha Direct Marketing Services Pvt. is building apartments and row houses.

Government Plans

Squabbling between government agencies on implementing infrastructure projects in the region has led to delays and curtailed development. A six-lane sea bridge that will connect the island city to the mainland has been delayed for the past few years because of a feud between two government agencies over rights to build it.

The Mandwa area in Alibaug is accessible by a 15-minute speedboat ride from Mumbai. That route isn’t available during the three-month monsoon rain season, which runs from June to September, forcing visitors to the town to take a three-hour car ride along 120 kilometers (75 miles) of road from Mumbai.

Alibaug needs to build a barrier that protects the harbor from the full impact of waves, which will make it accessible by boats throughout the year, said Sameer Nerurkar, founder and managing director of Samira Habitats, the real estate company developing 560 acres of the 2,200 acres it plans to develop in the coastal region.

The government aims to upgrade the infrastructure. The Mumbai Metropolitan Region Development Authority plans to invite tenders for the eastern waterways project, which will include a roll-on, roll-off service to ferry people and vehicles between Mumbai’s dockland and the jetty near Alibaug. The government is also planning to build a marina at Mandwa, a railroad, and a sea-link, which will cut travel time by road to an hour and fifteen minutes from three hours, said Orbit’s Agarwal.

“The Alibaug property market is quite illiquid,” said Mumbai-based Anand Narayanan, India director at Knight Frank. “I would say Alibaug isn’t a great investment destination, but a lifestyle choice, and lifestyle choices are never cheap.”

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