Thursday, January 18, 2007

High realty rates edge out average Mumbaikar

Times Of India

Mumbai: The overheated property market has virtually edged out the average Mumbaikar from his own city. And when a leading housing industry expert like Deepak Parekh of HDFC admits there is no scope for the common man to buy a flat in Mumbai, it reinforces the sentiment that skyscrapers, redeveloped societies and newly-constructed complexes, even in the suburbs, are beyond the reach of most salaried people. “It is unfortunate that the common man has to go out of the city in search of accommodation. There is little hope for him to purchase a house in Mumbai,’’ says Parekh whose father pioneered the concept of housing finance.

The question then is, who are these people buying homes across Mumbai today? What is their background, their profile?
According to the HDFC head honcho, they are mainly businessmen, professionals or successful Indian managers who may have made money on stints abroad and are now coming back on fat salaries. “Then there are NRIs and retired corporate heads buying apartments in south Mumbai,’’ says Parekh. The average salaried man, according to him, can only think of places like Borivli and beyond.

Vice-president (private banking department) ABN Amro bank, Deepak Rattan, fits the profile of an average flat-purchaser these days. He has finally settled for a three-bedroom pad in a Worli highrise for Rs 2.1 crore. The backside of his flat faces a slum, but Rattan says he hardly has a choice. “Gone are the days when a Rs 2-crore budget was considered huge in the heart of the city. Today, brokers tell you to try your luck in the suburbs,’’ he laughs.

Rattan’s comment echoes the experts who criticise the state government for its failure to provide decent low-cost, public housing and for promoting what US-based urban planner Edward Soja recently described as ‘Gated Communities’ where the well-heeled live behind iron gates.

Ketan Vadalia, a property developer in the eastern suburbs, says 70% of the buyers in locations like Ghatkopar and Mulund are traders from the metals and textiles market. The other 30% are salaried people, mainly from IT companies, drawing a minimum salary of Rs 1.5 lakh.
“The minimum budget for an apartment in Ghatkopar starts at Rs 50 lakh for a twobedroom pad. It can go up to Rs 1.25 crore for a larger flat,’’ says Vadalia.

“These buyers are people who have been in a family business for a long time and over the years they have had enough resources to buy a flat worth Rs 50 lakh in areas like Ghatkopar,’’ adds Vadalia. Interestingly, the communities with the strongest purchasing power are Gujaratis and Marwaris, who prefer areas like Santa Cruz, Vile Parle, Malad, Kandivli and Borivli in the western suburbs and Ghatkopar and Mulund on the eastern side.

Builder Nayan Bheda of the Neptune Group, which is setting up residential projects in Bhandup, points out that 90% of his almost 600 flat buyers are from the service sector, mainly from MNCs and corporate houses. The rest are Gujarati traders.

“Our customers fall under the higher middle income group. Flats in our project are pegged between Rs 50 lakh to Rs 80 lakh each, depending on the size. In the second phase, each will cost over Rs one crore,’’ says Bheda. Barely two years ago, Bhandup was one of the most affordable destinations to stay in. Prices in 2005 were below Rs 2,500 a sq ft; today, they have almost doubled.

It’s the same story in the western suburbs. Managing director and CEO of Mahindra Gesco, Pranav Datta, says his clients include doctors, architects, businessmen and senior professionals, who buy flats upwards of Rs 1.25 crore in places like Goregaon. “The salaried-class who can afford such flats earn Rs 30-Rs 40 lakh a year,’’ adds Datta.

As for central Mumbai, where glitzy residential towers are replacing defunct textile mills, the aspirational Mumbaikar’s dreams of purchasing a flat at the rate of Rs 4,000 per sq ft disappeared more than two years ago. Prices here have shot up by 300% since then.

Jaidev Mody of Piramals, which is setting up the Ashok Garden project at Parel comprising four towers, says 70% of the buyers are professionals from financial services companies, banks and large corporations, general managers, presidents and MDs.

Even rates in a congested and downmarket area like Khetwadi (where many redevelopment projects are coming up) are in the range of Rs 9,000 to 12,000 per sq ft. In nearby Girgaum, a two-bedroom flat would cost Rs one crore and double the amount for a three-bedroom flat.
Haresh Mehta, one of south Mumbai’s largest property redevelopers of dilapidated chawls and buildings, says that 80% of his clients are diamond merchants and traders from the metal market. “They have a lot of purchasing power,’’ he adds. Market sources reveal that customers buying flats in redeveloped cessed properties in south Mumbai have to pay as much as 40% of the amount in hard cash.

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