Boman Irani, managing director of Rustomjee, calls it an “asset-light model” for Mumbai’s real estate developers that offers a huge respite from an ever-increasing expenditure for land purchases. Irani should know as Rustomjee, which trades as Keystone Realtors, is the largest operator in redevelopment space. “Redevelopment will continue to serve as a key driver of growth…We are strategically positioned to capitalise on the current momentum,” Irani said after declaring the company’s second quarter results.
But local players like Rustomjee are up for some serious competition as property developers from across the country have warmed up to the idea in a city where real estate counts among the most expensive in the world. Mumbai is land-locked and land prices constitute 30 to 50% of the total project cost.
Both the scale and economics are added attractions. As per industry body CREDAI-MCHI, more than 25,000 buildings in the Mumbai Metropolitan Region (MMR) with an estimated value of Rs 30,000 crore are qualified for redevelopment. As per Municipal Corporation of Greater Mumbai (MCGM) norms, any building that is over 30 years old is declared dilapidated by MCGM and can qualify for redevelopment.
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“A lot of FSI (floor space index) is available to be consumed in old buildings. So a lot can be developed,” said the chief financial officer of a real estate company which is doing redevelopment projects in Mumbai. FSI means permissible development allowed on a plot of land.
The CFO said it is a great preposition for the developer as no upfront payment is required. “If the whole project is of 2 million sq ft, you give 1 million and get the same for yourself,” he said. Rajat Rastogi, CEO-West at Bengaluru-based Puravankara, agrees. “Mumbai’s redevelopment market is highly lucrative, offering significant opportunities for developers with the capability to execute complex projects,” he said, adding that the government’s support, through policy reforms such as easing development regulations and redevelopment incentives, is further driving this segment.
Puravankara forayed into Mumbai redevelopment in November 2023 by securing the redevelopment rights for two housing societies in Andheri West which has 3.65 lakh sq ft available for sales. It is also doing 2.5-acre redevelopment project in plush Pali Hills area and Breach Candy in South Mumbai and is in advanced talks with many societies for redevelopment projects.
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