Prestige Estate is weeks away from entering Mumbai's residential market

The largest real estate developer in the south is weeks away from entering Mumbai’s ultra-competitive real estate residential market. Prestige Estate, known for its gamut of constructions that range from malls and luxury apartments to golf courses and office space, has zeroed in on a land parcel in upscale Mumbai.

Irfan Razack, chairman of the Bengaluru-based Prestige group, said term sheets were expected to be signed in a month and a half. According to Razack, the project, planned in Byculla, is expected to give the developer a 500,000 sq ft residential development that would potentially be worth Rs 12 billion. “We are basing that pessimistically on the assumption that we should be able to charge Rs 25,000-30,000 a sq ft,” he said. 

This isn’t the first time that Prestige has looked at the Mumbai market — they also looked at an IT project in Airoli that hasn’t been signed off on yet but Byculla marks the first time “a handshake has happened”. That’s important because for Prestige, according to Ramesh Nair, the CEO of property manager Jones Lang LaSalle, a handshake is as good as getting a deal signed and done. “That’s not true for everyone in this industry,” Nair added.

Prestige’s partner in Byculla is New Consolidated Construction Company Ltd (NCCCL) and the terms of the deal include for Prestige to pay half the land value, which is north of Rs 2 billion, and remain as partners while NCCCL manages the on-ground dynamics. Razack said diligence had been on for a few months and Byculla represents a good foothold to start with in Mumbai for many reasons: It is central, has development potential and so far competition hasn’t been 

too focused on it.

Other realtors, however, feel it is not easy to tap Mumbai, which is in the throes of over-supply and facing a pricing pressure. In 2005, in a bid to go national, the country’s biggest developer, DLF, made a flashy debut in Mumbai when it paid some $160 million in a public auction for 17 acres of mill land. Six years later, they sold to Lodha Developers at a price four times. That ended their dream of being nationwide. At the same time, Unitech failed with a project in Kolkata. 

Then there are innumerable unsold inventory. Many Mumbai brokers say if you sit across the table with a company they are ready to bring prices down by as much as 30 per cent. 

Razack is unfazed by all that. “We have the mindset to do different things, we are creating management bandwidth locally and, most importantly, we are leaving our egos behind and bringing in our core skills,” he said. 

Prestige has built over 200 buildings, of which around 70 per cent are in Bengaluru, and has a Crisil DA1 rating that no other realtor in the nation has. 
 

Beyond that, Nair, said Prestige’s chances are optimistic, given the trend of regional domination has shifted. “Today the largest real estate player in the NCR area is Godrej Properties, the largest office space developer in Chennai is DLF, and one of the largest office space players in Hyderabad is the K Raheja Corp.”

Their USP, Razack said would be realistic pricing and timely deliveries. He agreed that challenges existed in the form of RERA; the company can’t launch anything without having a final approval. 

Gulam Zia, executive director at Knight Frank, said residential real estate in Mumbai was going through a rough patch. “Eight out of 10 projects are delayed by more than a year on average.” When most developers are losing consumer confidence as well as control on their balance sheets, a brand with a consistent track record, delivery schedules and standards should help set a new benchmark for the island city.