Pan-India developers chase Mumbai’s redevelopment, SRA opportunities

Developers from across India are seizing opportunities to redevelop Mumbai’s old, dilapidated buildings, housing societies and slums to expand their footprint in the land-starved financial capital.

In May 2022, Bengaluru-based Prestige Group launched Daffodils, an uber luxury redevelopment project in Pali Hill, Bandra West with a carpet area of 1.2 lakh square feet. The project has sold close to 70% residences since launch. Puravankara Ltd also secured redevelopment rights for two housing societies in Mumbai last year, with a gross development value (GDV) of ₹1,500 crore. In September, the group acquired rights for another project—Miami Apartments at Breach Candy, entering the uber-luxury south-Mumbai market.

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In 2023, Delhi-based DLF Ltd forayed into Mumbai to jointly develop a slum rehabilitation project with a subsidiary of Trident Buildtech Pvt. Ltd in Mumbai’s Andheri West. A year earlier, Ahmedabad-based Adani Properties Pvt. Ltd had won the mandate to execute the redevelopment of Dharavi, one of the world’s largest slums that sprawls across 600 acres.

"With limited opportunities of greenfield land parcels in Mumbai, a massive opportunity exists in the redevelopment and SRA space," said Tariq Ahmed, CEO, West India at Prestige Group. "So, I think that's where there is a lot of focus for developers considering the significant ongoing redevelopments of regular societies or Mhada societies and with multiple opportunities still out there." Mhada is the Maharashtra Housing and Area Development Authority.

The redevelopment scene

Mumbai’s redevelopment scene includes development agreements with housing societies, slum rehabilitation model as well as redeveloping cessed buildings, which have been constructed before 1960 in Maharashtra and the government collects cess from the residents of these buildings. Over 25,000 buildings in Mumbai’s metropolitan region (MMR) alone have outlived their useful life and are eligible for redevelopment, Dhaval Ajmera, secretary of Credai-MCHI, had said at a press conference.

“Mumbai is a redevelopment market," said Abhishek Kapoor, group chief executive and executive director at Puravankara. “We are actively pursuing opportunities on the redevelopment side in Mumbai. We've already signed three redevelopment projects, and we are working on a few more. So, the pipeline is quite robust."

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Redevelopment is an attractive space to be in for developers due to FSI benefits, potentially higher profit margins and for expansion opportunities amid a paucity of clean developable land in Mumbai. The developers can get access to prime land parcels in Mumbai, where there is less opportunity for acquiring land.

“Whether it is SRA or non-SRA buildings, such projects have the potential for higher FSI and higher returns, which is attracting all these developers to the segment," said Pankaj Kapoor, founder and managing director, at Liases Foras. “Around 60% of today's supply of launches comes from redevelopment—whether society or slum redevelopment."

Highly competitive

While the market poses an attractive opportunity, it is becoming highly competitive. The boom in real estate has encouraged a lot of players to take up redevelopment projects. Developers such as Hiranandani group, Keystone Realtors Ltd, Raymond Realty, etc. have a pipeline of such redevelopment projects.

“There is a mad rush among the developers to make newer commitments. So, they are offering very, very lucrative deals to the existing tenants to acquire the proposals," Kapoor said. “But a lot of this new supply that has come in is in the ₹2 crore-plus bracket of flats. In redevelopment, you are housing existing tenants and bringing in new tenants—so there is heterogeneity of demographics. Because of this, there may be less preference for people to pay because the exclusivity may not be there."

For buyers, competition means bigger homes, better amenities, parks, and an upgradation of living conditions.

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A lot has gone wrong for developers in the past whether in redevelopment projects or slum rehabilitation projects.

“In the past many housing societies in Mumbai entrusted the redevelopment of their projects to builders but were left in the lurch," said Anuj Puri, chairman of Anarock Group. “In many cases, they were cheated by builders in a variety of aspects. In others, the builder ran out of capital and left the whole undertaking in indefinite limbo."

“Meanwhile, the original owners incur huge rental expenses in alternate accommodations and are generally at the mercy of an outside party whose only objective is a massive profit margin," he said.

Fall of marquee players

Slum rehabilitation projects, especially, have led to the fall of some marquee players in Mumbai, according to Gulam Zia, senior executive director at Knight Frank.

Such projects led to the downfall and financial drain of players including Housing Development and Infrastructure Ltd (HDIL), Mint reported earlier. Orbit Group had also gone insolvent after a few of its redevelopment projects faced long delays.

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“What happens is when you're doing SRA, you have to take care of many things politically or with money," Zia said. “Every SRA project is a political landmine…so, cleaning slums is the dirtiest aspect that you could ever think of doing in the city of Mumbai."

Such projects are doable only when the slum’s problems are sorted and the demarcated, boundaried land is offered to a developer, Zia said. “If it's a good, listed player or a brand name, then they will definitely not touch any SRA development which is still plagued with the troubles of the past."

Eyeing the market

All kinds of players are eying the market

In a first of its kind exhibition called ‘Redeveloping Mumbai: Ease of Doing Redevelopment’ (EODR), organised by Credai-MCHI earlier this year, over 40 developers such as Rustomjee, Kolte Patil, Puravankara, Raymond Realty, etc. participated to connect with housing societies.

“Today if you take a trip to any locality, you see names of developers you’ve never heard of working on redevelopment, these players will be a challenge," Kapoor said. “Listed players or renowned names, on the other hand, are smart players, they have the skills and the financial muscles to really get the projects and keep in mind its liabilities and the future projections."

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Distressed assets are another opportunity. Prestige Group is also actively looking for stressed assets and stuck projects as a part of their strategy to expand in Mumbai.

"Stressed assets or stuck projects are always ones that you would look at. Obviously, you know, the land parcel has to make sense, where it's located, whether the product makes sense, all of that has to match," Ahmed said. “We've been successful doing it right now. We've done it, when we acquired the Prestige City Mulund out of bankruptcy. We acquired it at a very attractive valuation."