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Is this the sign of the beginning of a meltdown in Mumbai ?


Is this the sign of the beginning of a meltdown in Mumbai ?

Last updated: March 26 2008
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  • Is this the sign of the beginning of a meltdown in Mumbai ?

    Record real estate deals aborted

    Two big-ticket property deals in Kalina, including one reported on the front page of this newspaper last fortnight, go bust; has the BKC bubble finally burst?

    Two record real estate deals in Kalina that were supposed to bring a windfall to local residents have tanked as the buyers have abruptly pulled out as a result of the recent, sobering 'realty check' in and around the Bandra-Kurla Complex.

    In December 2007, 159-odd residents of Vivek Apartments at Kalina, located not too far from BKC which was then seeing real estate prices go through the roof, were offered nearly Rs 46,800 per sq ft by a ************** company, Sterling International Enterprises Ltd, that wanted to set up an office there. The residential complex has

    flats ranging from 465 sq ft to 785 sq ft, so the deal meant residents would get anywhere between Rs 2.10 crore and Rs 3.75 crore each after the deal was executed in March 2008.

    Residents of Kailash Prabhat, located a few metres away from Vivek Apartments, were at the same time offered Rs 210 crore for the residential building. The deal was therefore going to fetch Rs 32,000 per sq ft, so a flat of 750 sq ft would have got Rs 2.4 crore.

    Both offers were unprecedented as the prevailing rate in the area then was around Rs 4,000 per sq ft.

    However, both deals were called off recently in the wake of the very first signs of a meltdown in the property market and the turbulence in the stock market.

    In a letter to the secretary of Vivek Apartments dated March 11, 2008, Sterling said it had decided not to go ahead with the deal citing the due diligence report and advice of its legal team. It asked the society to return the Rs 25 lakh paid as earnest money while making the Rs 403 crore offer.

    Muralilal Chaturvedi, a real estate expert, said rates of property at the BKC were exorbitant and were putting off prospective buyers.

    He cited the March 18 auction of five MHADA properties — three commercial and two residential — at BKC. There were no bidders for two commercial plots, and the third had just one bidder; the saving grace was the record prices paid for the two residential plots.

    The lack of interest came as a rude shock to MHADA, which had auctioned three commercial plots at record prices as recently as November 2007.

    A broker said rental rates too had come down of late. Apparently, owners have reduced their demand from Rs 500 per sq ft to Rs 250.

    Chaturvedi cited the uncertainty in the stock market, which began in January 2008, as another reason for lack of enthusiasm among buyers.

    Residents upset but still hopeful
    Yakub Rais, secretary of Vivek Apartments, said Sterling cited a financial crunch as well as a steady fall in share prices for withdrawing its offer. The housing society has returned the earnest money, he added.

    The cancellation of the deal at the eleventh hour has stunned many residents.

    One of them said, "Since my financial position is not so good, I was looking forward to the Rs 2.75 crore that I would have got for my 500 sq ft apartment. I thought of purchasing an apartment in a nearby locality for Rs 1 crore and investing the remaining amount in a business. The letter has shattered my dreams."

    However, Rais is unfazed by the cancellation of the deal. He said other builders would come forward with similar offers due to the strategic location of their property. "We are looking for other prospective buyers and hope to strike a deal of a similar nature soon," Rais said.

    Residents of Kailash Prabhat too said they were optimistic. According to Tajammul Hussain, chairman of the society, the deal with the builder could not go through, but negotiations with two other interested parties were on.

    SO is this signs that now we can expect realty rates to head north ? Has the meltdown already began ?
    Last 3 months have seen very few deals been transacted at the sky high prices. Buyers are adopting a wait and watch policy. But at the same time, premium properties have no dearth of buyers, who are willing to pay fancy prices to snap up these premium properties.

    Where are we heading now ? Any guesses ?

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