The central region of Mumbai is set to witness a decline in real estate prices due to a boom in upcoming residential complexes in the Lower Parel region. According to a quarterly report by Cushman & Wakefiled, Pune is edging out Mumbai as the priority destination for information technology-enabled services (ITES) companies. These firms are expected to house much of their combined demand for the four million sq feet of space that will be required in the calendar year 2004 in Pune than in Mumbai. According to the report, commercial realty prices are expected to decline in the northern suburbs of Mumbai owing to excess supply of office space that is sought by ITES firms. A strong residential realty development (read construction activity) in the Lower Parel region of central Mumbai, which is expected to continue for another 12-18 months, should result in a dip in capital values in the neighbouring areas of Prabhadevi, Worli and other parts of the region. The survey has found that the erstwhile textile mill lands pocket borough of central Mumbai are being re-developed for 'integrated residential complexes' on a large scale. "With additional stock being added, we may witness a decline in capital values in the neighbouring areas of central Mumbai. However, this may be limited to the non-prime segment of smaller apartments of one-two bedroom-hall-kitchen units," the report states. The survey also states that with eminent developers taking up many of these redevelopment projects, there has been an enthusiastic response in the form of bookings for residential units in these yet-to-be created complexes. "The on-going construction activity by eminent developers is being met with good response with bookings for these apartments from an investment as well as end-user perspective, owing to the lucrative price offerings," the C &W report states. On the ITES front, while Mumbai and Pune offer distinct advantages to such companies seeking to locate their offices, the survey notes: "In the recent past, however, ITES firms have shown a preference to locate their facility in Pune. An analysis between the two cities provides interesting insights into the advantage of locating in one city as compared to the other." According to the report, while a highly skilled workforce is available to ITES companies in both Mumbai and Pune, the consequent higher cost and higher attrition rates in Mumbai see Pune becoming a more viable option for these firms. On the other hand, in respect of transportation, power supply and air connectivity, Mumbai scores higher than Pune for ITES firms, as the latter is found to be restrictive on this count. Real estate prices in Pune are also more advantageous for ITES firms as they are of as high a quality as in Mumbai, while being moderately priced, compared to the high realty costs in Mumbai. In addition to this, the higher cost of living in Mumbai compared to Pune sees the latter finding another strong reason for ITES firms to be locating into. One feature which is expected to boost ITES companies in both Mumbai and Pune is the recently announced stamp duty reduction from 10 per cent to five per cent. The stamp duty cut effectively reduces the gross acquisition cost of developers, investors and actual purchasers of commercial property and land. The C&W report also expects this to result in an increase in transaction volumes for purchase of commercial property and land, which will encourage transparency in transactions.
