Spinning the Mills

BUSINESSBRIEFING

SPINNING THE MILLS

August 2010 | A C&W India Publ icat ion

MILL LAND REDEVELOPMENT IN MUMBAI

1 Executive Summary

3 Mumbai’s Textile Mills: Their Rise, Fall

& Redevelopment

5 Key Pull Factor Driving Mill Land

Redevelopment

7 Staggered Supply: High Cost

7 Changing Paradigm in Mill Land

Redevelopment

9 New Address for Residential Space

10 Widening Gap between Supply and

Demand

11 Shift in Axis for Office Space

12 Bottlenecks to Reinvention of Mill

Lands

13 Outlook

15 About Cushman & Wakefield India,

Research & Business Analytics Group

For more information please contact:

Kaustuv Roy

First Floor, Mafatlal House

Padma Bhushan H. T. Parekh Marg

Churchgate, Mumbai 400 020

Tel : 91 22 6657 5555

Fax : 91 22 2202 5165

Email: [email protected]

With an unrelenting global population shift from rural to urban

areas, sustainable development of our cities is of vital importance

for the present as well as future generations. Issues of urban

development, such as creation of adequate infrastructure, public

utilities, mass housing, public spaces and commercial real estate are

matters of grave concern, particularly, for emerging economies. To

stay on course of achieving its development objectives, while

ensuring the greatest good for its citizens, India too needs to focus

on rejuvenation of its cities and urban spaces.

CONTENTS EXECUTIVE SUMMARY

INDIA REPORT | AUGUST 2010 1

already marked by sky-high trends, making it one of the costliest commercial destination in the world. Ever-

increasing demand for real estate across asset classes, coupled with near lack of free space, further adds to this

deadlock. In such a scenario, the only possible solution seems to be sustainable redevelopment projects

involving time-bound release of surplus land.

Mumbai's post-industrial areas include the land belonging to the Mumbai Port Trust (MbPT) and to its

erstwhile textile mills. While the MbPT has approximately 1800 acres of mostly derelict land and underutilized

buildings along the eastern waterfront, the mill lands account for some 600 acres in the heart of Mumbai.

POSSIBLE LAND RELEASE SOURCES FOR URBAN REDEVELOPMENT IN MUMBAI

Mill Land Port Trust Land Salt Pan Land

Best Option Challenges Challenges

Mumbai, with nearly half of its population residing in slums

and urban sprawls, is in dire need of a long-term urban

redevelopment project. The realty values of this financial capital are

Approx. 600 acres in the

heart of Mumbai

Approx. 1,800 acres along

the estern waterfront

Approx. 5,000 acres in

the city’s suburbs

In the light of the

challenges faced by other

areas, the mill lands are the

most viable options for

redevelopment – that too

in the heart of the city.

�Lack of clear

ownership

�Lack of proper

planning & vision

�Environmental

concerns

�Delicate eco-zone

�Coastal Regulation

Zone norms

�City’s last defence

against floods

Despite being nearly thrice the total mill lands area, MbPT land development appears to be

untenable owing to various compelling reasons, including policy issues, environmental concerns,

Coastal Regulation Zone (CRZ) norms, etc.

On the other hand, Mumbai's saltpans, admeasuring approximately 5,000 acres, are nearly eight

times the size of its defunct mill lands. Though the state government and municipal authorities have

been considering these protected areas for mass housing and commercial development,

environmental considerations need to be adequately addressed for this to happen.

Non-operational textile mills are also present in cities like Kolkata, Pune and Ahmedabad; but

unlike Mumbai's mills, most of these are located in the peripheral zones, and these land parcels are

therefore not as lucrative as those standing in the heart of Mumbai. And neither do any of these

other cities face as acute a space shortage as Mumbai, which is sea-locked on three sides. The

protracted controversy over these mill lands, however, continues — threatening to turn into a lost

opportunity, unless acted upon with some immediacy.

This, therefore,

leaves Mumbai's mill lands as the sole viable option for reclaiming land for public use.

Spinning the Mills - Mill Land Redevelopment in Mumbai


A C & W I N D I A P U B L I C A T I O N




MUMBAI’s TEXTILE MILLS: THEIR RISE, FALL & REDEVELOPMENT

The growth of the textile industry in India began in the 1860s to cater to the increasing demand for

cotton in colonial Britain's world market. Large scale cultivation of cotton in Maharashtra and

neighbouring states, coupled with the added geographic advantage of trading with Europe, made

the city an ideal location for the growth of the textile industry. Mumbai's (earlier known as Bombay) th

supremacy in the textile industry lasted well into the latter part of the 20 Century. As a result,

within a span of about 50 years of the first mill beginning operations, the city witnessed the

establishment of over 80 mills (textile and allied businesses).

thBy the end of the 20 Century, however, most mills in the city were faced with global

competition, increasing labour unrest and declining profitability. As a result several textile mills shut

down operations, freezing almost 600 acres of prime land in the centre of the city.

The emergence of Mumbai as a prime business centre in the 1990s attracted various foreign

firms to set up base in the city. The eventual evolution of Mumbai as a major global financial hub

over the last two decades, together with its growing population base and changes in regulatory

policies, gave mill owners an opportunity to encash into the vast potential of these mill lands. It was

widely recognised that these defunct industrial areas, if redeveloped, would make available

substantial real estate for commercial and other public usage, while providing better amenities,

infrastructure and modern architecture for its citizens. The redevelopment of the mill lands was

also expected to result in the decongestion of South Mumbai, while controlling surging capital

values in these locations by increasing supply near South Mumbai. Kamala Mills and Phoenix Mills

were among the earliest players to commercialise textile mill lands in Mumbai.

PROGRESSION IN MILL LAND REDEVELOPMENT

Growth Decline Redevelopment Way Forward

1926 - 1990 1991 - 2009 2010 - 20151854 - 1925

Source: Cushman & Wakefield Research

�First Indian cotton mill

starts operations.

�Increasing exports

fuels growth of textile

industry in Mumbai.

�Over 80 mills are set

up in the city by 1915

to service the

increasing demand for

textile exports.

�Emergence of new

global players (eg.

Japan) and slowdown

in demand leads to

drop in profitability.

�By 1953 only about 53

textile mills remain

operational in the city.

�The prolonged strike

of 1982 leads to

closure of many more

mills.

�In 1991, Mumbai land

regulation laws are

amended to allow for

the development of

closed mill lands.

�The State

government amends

Development

Control Regulations

(DCR) allowing

commercial

redevelopment of

mill land.

�In June 2005, the first

mill land is auctioned

by the National

Textile Corporation

in central Mumbai.

�By 2015, mill lands in

Mumbai are likely to

witness office space

development of about

8.25 million sq.ft.

�A significant number of

housing units are

expected to be

developed in a phased

manner on various mill

lands over the next 2

to 3 years.




To free land for physical and social development of the city, the state government of

Maharashtra amended the Development Control Regulations (DCR) and other rules/regulations

related to existing sick mills.

Some of the major amendments in the DCR and their impact on mill land development:

Amendments Impact

�The Maharashtra State Government amended

land regulation laws, allowing redevelopment

of mill land parcels. DCR 58 introduced.

�Regulation 58 – popularly known as “one-third

formula” – was framed, allowing mill owners

to sell/develop one-third of their land for

commercial use, and provide one-third to the

BMC for creating public amenities like open

spaces. The remaining land was to be given to

MHADA for the development of public

housing.

�The amendment was expected to free about 400

acres of land in the city centre for the

development of open spaces, parks and low cost

affordable housing for mill workers.

�As only a fraction of the land (one-third) was

available for commercial use, most of the mill

owners stayed away from undertaking any kind

of redevelopment projects.

�DCR 58 was amended to DCR 58 (I) which

stated that only vacant land on mill premises

with no built-up structure would be divided by

the “one-third” formula.

�With more area available for commercial use,

the amendment resulted in sale and

development of mill lands. However, only

marginal land was left for public amenities and

housing.

�Also resulted in National Textile Corporation

(NTC) auctioning off five mills with a total land

area of 50 acres in Central Mumbai.

�Mumbai high court puts a stay on mill land

redevelopment projects.

�Supreme Court stays high court order, asks

buyers to submit their development plans to

BMC in accordance with amended regulation

DCR 58 (I).

�Development of mill lands finally begins in the

city. This resulted in significant new supply in

Central Mumbai, altering the skyline of this

micro market.

1991

2001

2005 - 2006

AMENDMENTS AND IMPACT OF DCR ON MILL LAND DEVELOPMENT




KEY PULL FACTOR DRIVING MILL LAND REDEVELOPMENT

The redevelopment of mill lands in Mumbai is driven by several key factors, such as constrained

availability of land, strategic mill locations and the availability of support infrastructure. Some of

these key factors are analysed here in detail:

Constrained Availability of Developable Land

Mumbai's inability to expand, while keeping the CBD the centre of activities, has always been a

major concern. In spite of being one of the most densely populated cities in the world, real estate

development in Mumbai has been largely restricted. Development has only been towards the

northern and peripheral locations – further away from the CBD. Additionally, several regulatory

limitations like Coastal Regulation Zone (CRZ) norms and Floor Space Index (FSI) restrictions

have further curtailed the real estate development of the city. Located between the CBD and the

growing suburbs, these unused large parcels of mill land in the centre of the city are lucrative for

future development.

Strategic Location

Most mill lands in the city are located in and around Central Mumbai; in locations like Lower Parel,

Parel, Worli, Mahalaxmi and Dadar. Given their strategic location and availability of sound

infrastructure, Cental Mumbai is often

viewed as Mumbai's extended CBD.

With almost all existing as well as

upcoming precincts of the city

providing good connectivity to

Central Mumbai through road and rail

networks, mill lands in Mumbai enjoy

the following location advantages:

�Close proximity to established

commercial hubs like Churchgate

and Bandra Kurla Complex

�Good connectivity to existing and

emerging residential corridors

�Accessibility to suburban and

peripheral locations like Ghatkopar,

Chembur, Mulund, Thane and Navi

Mumbai through eastern

expressway and central railways

�Availability of retail, entertainment

and leisure facilities in the

immediate vicinitySource – Corres, 1996

MUMBAI MILL LAND MICRO MARKETS


MILL LAND LOCATIONS

Metro Rail

Andheri

Bandra

Dadar

Bandra Kurla Complex

Powai

Wadala

Ghatkopar-

Chembur

Wadala - Chembur

MonorailLower Parel

CSTFort Fountain

Churchgate

Colaba

Nariman Point

CBD

Worli

Breach Candy

Pedder Rd.

Bandra Worli Sea link

Central

Mumbai

5KM

10KM

15KM

20KM

Major Residential Hubs Major Commercial Hubs

Major Retail Hubs Major Train Station

Major Flyover / Bridges Major Infrastructure Project

UnderwayAirport

MILL LAND LOCATIONS

Lower Parel/

Parel

32%

Worli13%

Mahalaxmi10%

Lalbaug13%

Others13%

Dadar10%

Elphinstone4%

Prabhadevi5%





�Presence of several educational institutes, hotels and hospitals, offering sound social

infrastructure.

Comparatively Lower Rental & Capital Values

In spite of its strategic location, real estate values in Central Mumbai are comparatively lower than

some of the other prominent micro markets in the city. As a result, these precincts are becoming

increasingly attractive for both commercial and residential end users.

COMPARATIVE ANALYSIS

Zone Commercial Office Residential - Mid Range

Rental Values Capital Values Capital Values

(INR/sq.ft./month) (INR/sq.ft.) (INR/sq.ft.)

Central Mumbai 190-200 17,000 - 22,000 16,000 - 30,000

South Mumbai 250-300 28,000 - 30,000 30,000 - 50,000

North Mumbai (BKC) 225-275 25,000 - 30,000 18,000 - 26,000





STAGGERED SUPPLY: HIGH COST

With many mill lands being under litigation or debt ridden, the availability of these land parcels for

redevelopment has been staggered. While their unlocking was expected to bring a gross

rationalisation of values in the region, the actual costs have been remarkably higher due to the large

gap between demand and limited availability. Given the potential of mill land development,

developers have been compelled to pay high land prices for them. Mill land auctions by NTC were

also viewed as an excellent opportunity for well capitalized developers to create high value land

banks. As a result, the average values in these locations began to appreciate at a higher rate than

expected.

Some significant mill land transactions:

SIGNIFICANT MILL LAND DEAL IN MUMBAI

Source: Complied by Cushman & Wakefield Research based on publicly available information through media and other sources

Staggered release

of mill land has

led to slower

supply and higher

cost.

CHANGING PARADIGM IN MILL LAND REDEVELOPMENT

Driven by recent improvements in demand for

residential and commercial space in the city, many

developers are expected to aggressively pursue

opportunities to create new land banks. With

almost 60% of privately held mill lands already

developed or currently under development,

upcoming mill lands for auction are expected to

generate significant interest from developers.Source: Cushman & Wakefield Research

MILL LAND REDEVELOPMENT IN MUMBAI

80.8439.06

106.44217.88

146.83

10.920

50

100

150

200

250

300

350

Public Ownership Private Ownership

Developed Under Development To be Developed

Are

a (A

cres

)

Name of the Mill Year Micro Market Acquirer Area Deal Price

(Acres) (INR Million)

Mumbai Textile Mills Lower Parel Jawala Real Estate 16.63 7,022

(Sakserja Mills) (DLF Group)

Elphinstone Mills 2005 Elphinstone Road Indiabulls Real Estate 8.08 4,410

Kohinoor Mills No. 3 2005 Dadar Matoshree Realtors 4.91 4,210

and Kohinoor Group

Jupiter Mills 2005 Elphinstone Road Indiabulls Real Estate 11.13 2,760

Apollo Mills 2005 Parel Lodha Group 7.33 1,800

Dawn Mills 2006 Lower Parel Peninsula Land 6.50 1,200

Poddar Mills 2010 Worli Indiabulls Real Estate 2.39 4,740

Bharat Mills 2010 Woril Indiabulls Real Estate 8.38 15,050

2005




Soaring demand for mill lands can be gauged from the fact that “Reserve Selling Price” of

upcoming mill lands for auction is almost two to three times higher than the “Selling Price” of mill lands

a few years ago.

Mill lands redevelopment in the city has witnessed a paradigm shift in recent years. In 2006-07,

Mumbai's real estate was characterised by all-time high rental and capital values, increasing demand

for office space and limited Grade A supply. Additionally, the city also witnessed steep retail real

estate growth and the entry of several new brands. As a result, most mill lands were envisaged to be

redeveloped as high end commercial projects catering to office and retail sectors.

However, the global economic crisis of 2008, which severely impacted the Indian real estate

sector, altered the nature of mill land development in the city. Low demand, plummeting rental

values and large upcoming supply, raised concerns on financial feasibility of office and retail

developments over mill lands. As a result, many mill land projects, most of which were still at a

planning stage, were converted into residential projects.

Impact of Recent High-Value Mill Land Auctions

The recent auction sales of the adjacent mill lands of NTC's Poddar Mill and the Bharat Mill,

bought by Indiabulls Real Estate (IBRE), works out to approximately INR 2,000 million/acre.

IBREL now has a sizeable land parcel of approximately 11 acres in land-scarce South Mumbai, with

clear title. Additionally, IBRE might be given construction rights on these lands in exchange for a

government-approved multi-storied public parking lot, for which IBRE might be awarded an extra

floor space index (FSI) as high as 4 in the free sale component. It is most likely that these lands will

be utilised for high end residential projects that will be sold in the range of INR 27,000 - 45,000 per

sq.ft. With a typical 3 BHK apartment being sold in the INR 5 crore bracket, these residential units

will largely stay out of the reach of ordinary Mumbaikars. While a public multi-storey car park

(MLCP) might be a bonus for space-starved citizens, but with the municipality already having

sanctioned over 25,000 parking slots in the Worli-Parel-Sewri micro market, the need for yet

another MLCP is debatable.

KAY FACTORS DRIVING HOUSING DEMAND IN

CENTRAL MUMBAI

�Limited opportunity for new residential developments in

South and South Central Mumbai

�With capital values in South and South Central Mumbai

being among the highest in the country, there is

increasing demand for residential apartments near South

Mumbai with better amenities.

�Lower capital and rental values in Central Mumbai as

compared to its counterparts in South and South

Central Mumbai.


Ashok Towers Beaumonde

Launch Price 2Q 2009 2Q 2010

CAPITAL VALUE MOVEMENT ACROSS MAJOR RESIDENTIAL

PROJECT ON MILL LANDS

0

10000

20000

30000

40000

50000

60000

70000

Planet Godrej

Average C

ap

ital V

alu

es

(IN

R/s

q.f

t.)




NEW ADDRESS FOR RESIDENTIAL SPACE

Changing lifestyles and an increasing demand

for apartments with the latest amenities and

architecture has resulted in a growing demand

for premium housing projects. With

opportunity for any new development in

South and South Central Mumbai having

become largely exhausted, Central Mumbai is

fast emerging as the preferred location for

new residential space in the city. Besides, most of the existing housing stock in South Mumbai is

dated and lack the latest modern amenities and services.

KEY DRIVING FACTORS FOR PREMIUM HOUSING

LAUNCHES IN CENTRAL MUMBAI

�

and NRIs

�Growing demand for apartments with better

amenities and modern architecture

�Higher profit margins in the premium housing

segment

Buoyant demand for premium housing from HNIs

MAJOR UPCOMING RESIDENTIAL PROJECTS ON MILL LANDS IN MUMBAI

Compiled by Cushman & Wakefield Research

Mill Land Name of Developers Name of Project Approx. Units

Mumbai Textile Mills DLF NA 1,000

(Sakserja Mills)

Pidilite Industries D B Realty Orchid Heights 640

Swan Mills Peninsula Land Ashok Gardens 600

Hindustan Mills K. Raheja Corp Vivarea 492

Crown Mills D B Realty Orchid Crown 342

Srinivas Mills Lodha Group World One 300

Apollo Mills Lodha Group Lodha Bellissimo 267

Elphinstone Mills Indiabulls Real Estate Indiabulls Sky Suites 215

Apollo Mills Lodha Group Lodha Primero 180

Spring Mills Bombay Dyeing NA 160

Sri Ram Mills Sri Ram Urban Infrastructure Palais Royale 120

Jupiter Mills Indiabulls Real Estate Indiabulls Sky 102

Jupiter Mills Indiabulls Real Estate Indiabulls Sky Forest NA

Khatau Mills Marathon Nextgen and NA NA

Adani Infrastructure




WIDENING GAP BETWEEN SUPPLY AND DEMAND

Over the next three to four years, Central Mumbai

is expected to witness a residential supply of

approximately 7,000 apartment units.

Interestingly, out of this total upcoming supply,

nearly 4,400 apartment units are coming up on

mill lands.

With an estimated demand of approximately

2,300 to 2,600 residential units over the next three

years, Central Mumbai will be faced with a significant supply/demand gap. With supply

significantly outstripping demand, capital values in Central Mumbai would witness downward

pressure. Moreover, availability of mill lands through auctions in the near future would lead to

additional supply in this precinct. With locations like Worli and Prabhadevi being the preferred

choice for buyers, taking into account better infrastructure facilities, the residential segment of

Lower Parel will witness correction in the near future.

Right pricing is the most critical component driving demand in these upcoming residential

projects on the mill lands of Lower Parel and Parel. Majority of upcoming apartments are being

priced over INR 70 million; and demand is being driven solely by the high income segment. With

transportation issues and existing congestion levels emerging as the key drawbacks, capital values in

Lower Parel should be lower than that of Worli and Prabhadevi which provide better social and

physical infrastructure facilities. Moreover, apartments with smaller unit sizes of 1,200 to 1,500

sq.ft., with price levels in the range of INR 30 to 45 million, will lead to higher absorption rates.

OTHER MAJOR RESIDENTIAL PROJECTS IN CENTRAL MUMBAI

Compiled by Cushman & Wakefield Research

Name of Developers Name of Project Location Approx. Units

Unitech The Residences Parel 250

Unitech Woodside & Ascot Dadar 240

Kumar Builders Kumar Echlon Worli 200

DB Realty Orchid Enclave – II Mumbai Central 188

Orbit Group Orbit Terraces Lower Parel 108

Orbit Group Orbit Grand Lower Parel 88

Rupji Constructions Rupji Arena Lower Parel 88

Ahuja Group Ahuja Towers Worli NA


UPCOMING RESIDENTIAL UNITS IN CENTRAL MUMBAI

0

500

1000

1500

2000

2500

3000

2010 2011 2012 2013

No

of

Up

co

min

g A

partm

en

ts

Apartments with

a unit size of

1,200 to 1,500

sq.ft., within the

price range of

INR 30 to 50

million will

witness high

absorption rates.




SHIFT IN AXIS FOR OFFICE SPACE

Mumbai's CBD (comprising Churchgate and Nariman Point) and Bandra Kurla Complex (BKC)

have been the commercial office space hub till the recent past. However, with mill lands being

redeveloped into Grade A office space, Central Mumbai has currently emerged as an extended

CBD for Mumbai. Central Mumbai is also being preferred by large Indian and multinational

corporate houses as an alternative to the CBD. Larger floor plates with better amenities,

comparatively lower rentals, good connectivity to other micro markets, proximity to residential

precincts, etc., have all worked in favour of mill land redevelopment in Central Mumbai.

COMPARATIVE ANALYSIS OF THREE MAJOR MICRO MARKETS OF MUMBAI

Central Mumbai CBD Bandra Kurla Complex

Average Base Rent

Upcoming Supply

Amenities

Infrastructure & Connectivity

High Moderate Low


Availability of mill lands for redevelopment has altered the dynamics of commercial office space in

the city. Central Mumbai's share of total office stock is expected to rise from 5% in 2000 to 14% by

2012. The emergence of Central Mumbai as a major commercial office hub has been further aided by

continued migration of several large multinationals from the CBD to Central Mumbai and other

suburban locations like BKC and Andheri. As a result, the CBD is expected to witness reduced

importance as a major commercial hub in the near future.

Migration of

multinationals to

central and

suburban micro

markets, along

with fewer

opportunities for

new development,

will reduce the

importance of

Mumbai's CBD in

the foreseeable

future.

INCREASING NON-CBD SUPPLY

2000 2006 2012

CBD20%

CBD36%

CBD8%

Lower Parel

5%

Lower

Parel

7%

Lower

Parel

14%Worli

12% Worli

4%

Worli

6%


Central Mumbai, which has an existing office stock of 4 million sq. ft., will add about 8 million

sq.ft. by 2013; the majority of which will cater to the IT/ITeS sector. In spite of recent demand

improvements, the upcoming office space supply in Central Mumbai is significantly higher than the

anticipated demand. Additionally, with availabilities of low cost alternatives catering to the IT/ITeS

sector in locations like Andheri, Malad and Thane, Lower Parel is expected to witness downward

pressure on capital and rental values in the short to medium term.




MAJOR COMMERCIAL PROJECTS ON MILL LANDS IN MUMBAI


Upcoming

IT/ITeS-specific

commercial office

supply in Central

Mumbai is

expected to

outstrip demand,

pressurising rental

and capital values

in the long term.

BOTTLENECKS TO REINVENTION OF MILL LANDS

While mill land redevelopment has transformed the landscape of Central Mumbai considerably, it

has also unearthed some critical hindrances that the micro market could face in the near future.

Limited Infrastructure Development

Despite large scale real estate development (both commercial and residential), there is a

conspicuous absence of infrastructure development in the micro market. This location has

extremely constricted roads that are likely to come under severe pressure with increased traffic flow

expected to be generated by the growing number of commercial office space and residential spaces.

The Bandra-Worli Sea Link as well as the proposed Metro Rail project are expected to have very

limited impact on easing heavy traffic flows here.

Rationalisation of Values

Even after the mill lands were initially opened up for redevelopment, only a fraction of the

estimated supply was actually made available for public use. Thus the impact that this additional

supply was expected to have in terms of rental and capital values, stood largely negated. With a

large part of mill land tracts being either involved in legal tussles, heavily indebted or already

mortgaged, the prospect of any new mill lands becoming available for development in the near

future is quite doubtful. Value rationalisation, therefore, will probably have to take a backseat for the

time being.

Downward Pressure on Financials

While this central micro market is expected to witness substantial upcoming office supply, demand

for office space may not increase proportionately enough. Even in a scenario where the IT/ITeS

sector – one of the principal growth drivers for commercial office space in the city – regains its

historical growth rate, demand would remain focussed on low cost micro markets like Navi Mumbai

Mill Land Name of Project Area (million sq.ft.) Current Status

Jupiter Mills One Indiabulls Centre 1.43 Operational

Elphinstone Mills Indiabulls Finance Centre 1.67 Under Construction

Ruby Mills The Ruby 0.85 Under Construction

Jalan Mills NA 1.35 Under Construction

Apollo Mills Lodha Excelus 0.38 Operational

Dawn Mills Peninsula Business Park 1.20 Under Construction

Century Mills NA 2.00 Under Construction

POSSIBLE IMPACT OF INCREASED LAND SUPPLY IN CENTRAL MUMBAI

Infrastructure Development Changing Lifestyle Real Estate Impact

�Large scale redevelopment of

mill lands will strain civic

infrastructure amenities like

road transportation, water

supply, etc., in Central

Mumbai.

� The fast paced real estate

construction will compel

development of support

infrastructure in Central

Mumbai.

�Better planned projects to

suit modern living

�Better lifestyle amenities like

parking space, recreation &

sports areas, security

provisions, etc.

�Better design & architecture

over older generation supply

�Surplus supply will help

stabilize exorbitant land rates

�Increased housing supply will

cause cap value correction in

Central Mumbai

�Commercial office market

might witness strong

competition from upcoming

supply in Central Mumbai and

other locations like Andheri,

Thane, Navi Mumbai, etc.




CONSISTENT AVAILABILITY OF MILL LAND FOR DEVELOPMENT WILL HELP MODERATE RENTAL AND CAPITAL VALUES ACROSS

RESIDENTIAL AND OFFICE SECTOR

OUTLOOK

There is an urgent need for a time bound redevelopment policy for the city at present. The absence

of any such policy towards the redevelopment of mill lands has resulted in inconsistent and

sporadic development of these land parcels. As a result, the task of moderating surging capital

values in Mumbai, which was one of the primary objectives of redeveloping mill lands, has not yet

seen much success.

Cushman & Wakefield Research is of the opinion that a time bound, development plan

spanning approximately 10 years for mill lands could add significant supply across both residential

and office sectors. Such a planned policy is expected to lead to the development of approximately

17,000 to 22,000 residential units, and nearly 20 million sq.ft. of office space supply, over the next

10 years. Moreover, a stable upcoming supply trend is expected to help moderate residential capital

values across both Central and South Mumbai, while influencing values in other parts of the city.


RESIDENTIAL SECTOR

0

10

20

30

40

50

60

70

80

2010 2012 2014 2016 2018 20200

500

1000

1500

2000

2500

3000

3500

4000

Supply - Residential Demand - Residential Mill Land Release

OFFICE SECTOR

0

1

2

3

4

5

6

2010 2012 2014 2016 2018 2020

Supply - Office

Are

a (

Million s

q.ft.)

and Thane. As a result, rental values in these micro markets are likely to come under pressure. This

downward pressure on rental and capital values could, consequently, force investors to give such

projects a miss.




Mill lands in Mumbai, which have been a driver for growth and employment till the 1990s have yet

again emerged on the centre stage, providing huge potential for development activity in the city. Mill

land redevelopment on other hand, given its geographic and economic benefits, is an ideal and

opportune case for urbanisation, focussing on the social, economic and financial benefits of all

stakeholders. The city, however, has failed to reap the anticipated benefits from the redevelopment

of these land parcels due to the sporadic and slow development pace over the years. The real

challenge towards mill land redevelopment lies in the creation of a holistic approach that should

focus on some of the following aspects:

Regulatory Regime

Regulatory policies governing mill land have largely been reactionary. These policy changes related

to mill lands have undergone frequent changes resulting in the slow development of mill land.

Going forward these policies will have to be reoriented such that not only do they pace up the

process of bringing mill lands into the property market, but also cater to the interest of various

stakeholders (mill owners, current occupiers, environment groups, state government, etc.).

Efficient Land Utilisation

A balance in development on mill land (e.g. commercial, residential, retail, public utility) needs to be

brought in. A planned and guided usage of mill lands will not only ensure a balanced

supply/demand equation, but also moderate price movements curbing artificial shortage of supply.

The release of large supply of mill land at preferred locations would create a surplus, leading to

stabilisation of values.

Infrastructure Development

In order to transform the micro market into a successful real estate destination, a collective

approach of developing infrastructure (i.e. improved transportation and better utility services) is of

paramount importance. The longstanding stalemate on redevelopment of mill lands seems to be

ending, with many mill lands expected to undergo redevelopment in the coming months. As many

developers are keeping a close watch on these last large available land parcels in the city, the skyline

of Central Mumbai is poised for a significant change.




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Authors of the report:

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Saon Bhattacharya


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Megha Maan


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Published by Corporate Communication.

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Spinning the Mills