While land prices in the distant suburbs of Mumbai and Navi Mumbai have softened somewhat in the last few years, they have stayed more or less stable in Mumbai city.
Reserve prices for land parcels in Mumbai are being fixed at very modest levels so as to attract buyers. Plots close to the Navi Mumbai International airport are to be auctioned by Cidco (City Industrial and Development Corporation of Maharashtra) at prices that about 7% lower than the prices that land in New Panvel fetched in May. In other words, the next round of auctions will see lower reserve prices for plots that are better located. This is probably a consequence of the fact that in May, CIDCO had sold six plots in New Panvel at prices that were as much as 40% lower than the prices seen in November 2016. While land prices in the distant suburbs of Mumbai and Navi Mumbai have softened somewhat in the last few years, they have stayed more or less stable in Mumbai city. Somy Thomas, managing director, (valuations and advisory) Cushman and Wakefield India, says developers are able to buy land at roughly the same prices after three or even five years. “There has not been too much of a correction in prices of land in Mumbai. While Thane may have seen a slight decline, in Mumbai it is more of a time correction rather than a price correction,” Thomas said.
Indeed, the real estate sector might be in a slump but there have been big-ticket transactions, albeit few and far between. The recent sale of a three-acre land parcel for Rs 610 crore, in the up-market Worli area by Siemens to the K Raheja-GIC combine marked the first big land transaction in south Mumbai in many years. In 2012, Hindustan Unilever had sold Gulita, its one-acre, sea-facing property in Worli, to Piramal Realty, for Rs 452.5 crore. While the price of land depends on several factors — size of the plot, clear titles, proximity to highways and railway stations — and no two plots of land are strictly comparable, a glance at the transactions reveals some softening in prices over the years in Navi Mumbai. For instance, one deal in 2010 was done at Rs 6.1 crore per acre, another transaction in 2017 was concluded at Rs 5.7 crore per acre between K Raheja and Mafatlal. “Land parcels are not strictly comparable due to the varying floor space index (FSI) for different categories of construction. So if developers are not confident of pricing at a particular level they will pay less for the land,” Thomas explained.
Land holdings of companies are typically free of encumbrances and encroachments and have clear titles, and consequently command a premium. Ashutosh Limaye of JLL India points out that prime locations such as Worli allow builders several options whether it’s a residential property or a mall or even a hotel. “This is why developers are often willing to pay a premium. They are also keen to pick up plots which are not always available,” Limaye observed.