With 56 floors and 320 meters in height, Palais Royale project in Worli was touted as India’s tallest tower with luxury apartments costing upwards of Rs 25 crore/unit. However, developer, Shree Ram Urban Infrastructure reportedly defaulted on its debt repayment to India Bulls Housing Finance (IBHF).
What happened with Palais Royale Project seems to be a prime example of the present state of Mumbai real estate. Worli-Lower Parel stretch in South Central Mumbai, an area which was once considered sought after location in MMR for premium real estate, now seems like an open wound. The luxury real estate projects that were launched there in a spurt seem to be going down the rabbit hole as sales are slow and funds have almost dried up.
MMR vs NCR
The MMR market is reportedly grappling badly with a lack of lenders and is showing signs of distress, which are much deeper than National Capital Region (NCR), which was the worst hit in the slowdown so far. The only difference is that while NCR is coming to terms with the slowdown, the crisis in Mumbai real estate market is still unfolding.
NCR’s troubles have been largely developer-created. While Gurugram focused on luxury and upper mid-segment, but overlooked affordability, leading to piling of inventory, Noida’s developers had a free run due to availability of land on credit.
Mumbai’s crisis differ in ticket size as premium and luxury segment are the ones that are hit hard. Refinancing is nowhere to be seen.
The latest move of NHB directing home financiers from desisting from supporting financial subvention scheme has further hit the market. The stakes are only higher here in Mumbai.
Lack of funds is clearly having adverse effects on Mumbai market. As per RERA estimates, MMR has 48% unsold inventory, but developers have launched more projects despite weak demand. As per Knight Frank report, residential project launches rose 22% in Mumbai between January and June 2019 compared to the same period last year.
“The cost structure (of projects) is skewed due to high land prices and the premium FSI (floor space index) that needs to be paid by developers —as a result prices can’t drop dramatically,” Sharad Mittal, chief executive, Motilal Oswal Real Estate, the realty-focused private equity arm of Motilal Oswal, told Livemint.
“More than half the developers will find it tough to survive if the liquidity crisis continues and recovery, right now, seems a long way off,” Niranjan Hiranandani, managing director of Hiranandani Communities, told the publication.
Read more about Mumbai real estate market here.