The real estate boom in Mumbai has been awe-inspiring, reshaping the city’s skyline and attracting both investors and dreamers alike. However, beneath the surface of this dazzling growth lies a complex narrative, one that raises pertinent questions about its sustainability. In this blog, I delve into the challenges faced by developers in Mumbai and whether the city’s real estate development is truly sustainable.
The Burden of Approval Costs
One of the most significant hurdles for developers in Mumbai is the exorbitant approval cost. Realty projects in the city bear the brunt of a whopping ₹54,221 per square meter as approval costs through various premiums. This staggering cost adds immense pressure to the already hefty expenses involved in the construction and marketing of projects. As a result, many small-scale developers find it exceedingly challenging to survive.
The Pricey Apartments of Mumbai
Another alarming statistic is the average cost of an apartment in Mumbai, which stands at ₹19,485 per square foot. This is nearly double the average cost in Delhi and Bengaluru, making Mumbai one of the most expensive cities in the country for real estate.
The Triple GST Effect on Redevelopment Projects
Another issue plaguing Mumbai’s real estate sector is the triple GST effect faced by redevelopment projects. The Goods and Services Tax (GST) has added to the already burgeoning costs, impacting the viability of these projects.
Hindrances to Mumbai’s Growth Trajectory
Mumbai’s growth trajectory has been hampered by various factors- soaring property prices have led to a substantial erosion of Mumbai’s competitiveness, discouraging professionals seeking affordability and safety. Many young, talented individuals are now looking to settle in more affordable cities like Pune or Hyderabad, further hindering Mumbai’s growth potential.
GDP growth rate: Mumbai vs. Bengaluru
To put things into perspective, between 2000 and 2023, Mumbai’s GDP growth has grown tenfold, while Bengaluru’s has seen a staggering twenty-sevenfold increase. This stark contrast underscores the need for Mumbai to rethink its approach to real estate development. The city needs to find a balance between attracting investment and ensuring that its real estate market remains accessible to a wider range of individuals.
MahaRERA allows deregistration of Real Estate Projects
The sustainability of real estate development in Mumbai becomes even more intriguing when we consider recent developments. The Maharashtra Real Estate Regulatory Authority (MahaRERA) issued an order on February 10 that formally allows developers to deregister a real estate project under certain conditions. This move by the regulatory authority is significant as it acknowledges the challenges faced by developers in the city. The reasons cited for deregistration include a lack of funds, projects being economically unviable, ongoing litigations, disputes, family disputes, and changes in government or planning authority notifications.
While this may provide some relief to developers grappling with financial burdens, it also raises questions about the overall health of the real estate sector in Mumbai. It highlights the need for a more comprehensive and sustainable approach to ensure that real estate development thrives in the city.
Is real estate development in Mumbai sustainable?
The answer is a complex one. While the city continues to attract big players in the industry who can bear the high costs and risks associated with development, the same cannot be said for smaller developers. As a result, there is a growing disparity in the quality and availability of housing, with luxury apartments flourishing while affordable housing remains in short supply.
Steps Towards Sustainable Real Estate Development in Mumbai
Mumbai’s unique challenges, such as limited land availability and a burgeoning population, necessitate innovative solutions. The government and stakeholders in the real estate sector must come together to address these issues. Here are a few potential steps that could contribute to making real estate development in Mumbai more sustainable:
1. Streamline Approval Processes
Simplifying and expediting the approval processes can significantly reduce the approval costs and the time it takes to start construction.
2. Promote Affordable Housing
Encouraging the development of affordable housing units should be a priority. This can be achieved through incentives and subsidies for developers willing to take on such projects.
3. Infrastructure Development
Investing in infrastructure projects, such as better transportation and connectivity, can open up new areas for development, easing the pressure on prime real estate locations.
4. Support for Small Developers
Offering financial support or access to low-interest loans for small-scale developers can help diversify the real estate landscape.
In conclusion, while Mumbai’s real estate development has been remarkable in many ways, it faces substantial challenges that threaten its sustainability. To ensure that the city continues to thrive, it is imperative that both the government and the private sector work collaboratively to find innovative solutions that promote affordable housing, reduce approval costs, and create a more balanced real estate market. Only then can Mumbai truly be a city where growth is sustainable, and everyone can find their place in its vibrant landscape.