Property developers are dreaming of making Lower Parel, a former textile hub in central Mumbai, into a super-luxury residential address for the country's ultra-rich.
However, analysts and property consultants see oversupply of premium houses looming large on the island city's skyline.
In all, Lower Parel is expected to see over 10 million sq ft of residential supply in the next three to four years, according to Religare Capital Markets.
"Whenever developers see demand in one area, they launch projects there. But when the projects get completed, the demand may not be there,'' says Pranay Vakil, chairman of Knight Frank, a property consultant.
Too much, too soon?
Vakil's words clearly reflect the movement in Mumbai. Prices of high-end properties in South Mumbai went down 50-60 per cent during the slowdown of 2008-09.
"I feel there is a limited demand for high-value apartments of Rs 5 crore (Rs 50 million). Demand will not sustain unless the whole supply is spread out over the five years," Vakil adds.
According to estimates, about 7,000 new luxury apartments are expected to be available in the city in within a year, for over Rs 4.7 crore (Rs 47 million) each.
On Tuesday, the Lodha group announced a 117-storied residential tower, World One, touted as the world's tallest residential tower, on the defunct Shreeniwas Mills plot in Lower Parel.
The tower will have 276 apartments and a built-up area of 1.2 million sq ft. With prices only millionaires can afford -- Rs 7.5-50 crore (Rs 75-500 million) -- the project is expected to have over 200,000 sq ft of landscape area for the residents, with am 80,000-sq-ft sports club at 175 ft above the ground.
Just a few yards away, DLF, country's largest developer, is planning to launch Mumbai's largest luxury residential project with a built-up area of 4.5 million sq ft, where it is building three towers of 90 floors each.
The entire project is expected to have around 1,000 apartments in a price range of Rs 5-10 crore (Rs 50-100 million).
Many say pricing will be the key in selling such apartments. While Lodha did selective marketing of its World One project among its old customers at Rs 25,000 a sq ft, DLF is also expected to sell the apartments in the similar price range.
"We believe new launches from DLF, Lodha and Raheja have to be at a decent price (Rs 15,000-20,000 per sq ft) to bring absorption in Lower Parel," said Religare analysts in a report. Adds Raminder Grover, chief executive of Homebay Residential, a property consultant: "Developers need to be realistic."
Developers unfazed
Developers, however, believe there is enough room for their projects. "There may be some moments of oversupply but there is a depth in the market. Good products definitely sell in the market,'' says R Karthik, senior vice-president of the Lodha group, which has almost sold off its Bellissimo project in the Mahalaxmi area of Mumbai.
"There will be demand for projects in these areas as no major supply is coming up in other parts of Mumbai. I feel there is sufficient supply in this area to meet the demand," says Vinod Goenka, chairman of DB Realty, which is developing premium residential buildings in nearby localities.
Goenka believes prices in the area will not go below Rs 20,000 per sq ft, given the cost of land and construction.
