ANAGHA KAMBLE'S NEW APARTMENT looks like it’s going to be pretty fancy when it’s done. Black granite-topped counters in the kitchen, cleverly designed storage areas, rooms that take advantage of natural light, and more. True, it’s small, and really nothing when you compare it with the premium apartment blocks that are coming up next door (at least Rs 15 crore a flat), but consider this—Kamble’s apartment is one of more than 1,000 in an area that was once the Gopal Nagar slum. The slum—a group of 60-year-old ramshackle flats and huts—was built by mill workers in the early 1950s, when Mumbai was a textile boom town. But interest in the industry died out, and the mill owners wanted to redevelop the acres of land that the textile mills occupied. Labour disputes ensued, and the mill lands lay unused for the next few decades waiting for the litigation to end.
The events that led to the litigation and the wait for a ruling was marked by violence and accusations of political and gang involvement. Trade union leader, Datta Samant, was killed allegedly for his opposition to the redevelopment of mill lands; Samant had demanded that the mills be made operational, or else the mill workers be suitably rehabilitated. Some 20 years after the first mill owner filed a case asking to be allowed to sell mill lands, the courts ruled that they (some 600 acres in all) could be redeveloped once the workers were rehabilitated and compensated for the loss of their livelihood. And the mill areas came alive again, this time with the sound of building.
Since 2004 or so, real estate developers have been pumping in crores of rupees in building swank office and residential blocks as well as redeveloping slums like the Gopal Nagar one. Kamble’s apartment block (and the swank ones next door) is being built by Omkar Developers, a Mumbai-based realty company. The state government has notified a scheme under which developers like Omkar get permission to build extra floor space in lieu of redeveloping slums. And so there’s the 1,800-odd small flats coming up right next to three skyscrapers with 400 apartments each, all built by the firm. The Rs 15 crore to Rs 100 crore apartments are expected to subsidise the cost of building the little ones like Kamble’s.
Omkar is just one of the dozens of developers in this area—in and around Lower Parel in central Mumbai. Once written off as the factory side, indeed the wrong side of the tracks, this area is suddenly happening. It’s in, it’s cool, it’s hip. It’s where fashionable restaurants are coming up, it’s where the edgy designers want to be, it’s where the ad and art crowd hangs out. Lower Parel is going through the same process of gentrification as neighbourhoods in other large cities did decades ago—think SoHo in New York City, or Soho in London. And the result is a boom in real estate prices, as people who once didn’t even consider Lower Parel as a part of Mumbai, now come there in droves to live, work, and party.
The area is getting unrecognisable for those who have lived in the city for generations. Even those who have seen it grow over a handful of years are amazed. “In 2005, there was not so much as a decent restaurant for office-goers to have lunch,” says Tarini Mohindar, who started Cafe Zoe two years ago in Lower Parel, in what used to be a jewellery factory. Today, there are close to 100 restaurants, catering to all budgets and palates.
Before she became a restaurateur, Mohindar worked with FCB Ulka, one of the first advertising agencies to move to Lower Parel. That was the time when the tony South Mumbai addresses, particularly Nariman Point, had become too expensive for most businesses. Then came Lowe Lintas. Lower Parel in 2005 was still a rundown neighbourhood, and the head of Lowe Lintas then, Alyque Padamsee, insisted on calling the area Upper Worli, in a bid to seem like a South Mumbai address. Today, Lower Parel is a sought-after address in its own right.
Last year, the Shangri-La opened its first five-star hotel in Mumbai at Lower Parel, the third after ITC’s Grand Central and Four Seasons. Two more such hotels are in the planning stages.
Lodha Developers is building what it calls the world’s tallest residential tower, World One, where flats will cost upwards of Rs 50 crore. Last year the builder paid Rs 2,700 crore for a 6-acre parcel of land it acquired from Delhi-based real estate firm DLF, and plans to construct over 1,000 apartments costing Rs 3 crore a piece. Indiabulls is building Sky, an ultra-premium residential complex, where houses start at Rs 30 crore. Omkar has roped in renowned architects Foster Partners for its upscale apartment complex in Worli.
Over $5 billion has been pumped into Lower Parel and a 3 km radius since 2004. Like Gopal Nagar, several slums and old chawls (buildings with several 200 sq. ft. or so rooms, each let out as an independent apartment, with common toilets on each floor) have been redeveloped. This has resulted in over 20,000 small apartments coming up for sale; these are not in the Sky or World One league, but promise the basics such as water supply and indoor plumbing. Basically, Kamble’s flat. The idea is to improve the standard of living of slum dwellers, and a court order prevents these flats from being sold for 10 years.
However, there’s brisk illegal trade; the Gopal Nagar flats are going for roughly Rs 45 lakh each. At current market rates, slum dwellers in central Mumbai have assets worth $2 billion (Rs 11,856 crore). Did someone say Slumdog Millionaires?
THE DEVELOPMENT OF Lower Parel has come around the same time that the rest of the country has seen a boom in real estate prices. It’s happening in Delhi NCR, where land prices in Gurgaon and Noida are skyrocketing. It’s happening down south in Chennai, where far-flung areas such as the Old Mahabalipuram Road and Velachery have suddenly become sought after, thanks to the IT boom (most IT companies have their offices on Old Mahabalipuram Road). It’s happening in Bangalore and Pune, where the outskirts are seeing a sudden spurt in the development of gated communities.
But the metamorphosis of Lower Parel is different. For one, it’s happening in one of the world’s most expensive real estate markets. So, any fluctuation in prices here could have a cascading effect on other markets. There’s also the fact that Mumbai is still India’s financial capital, and real estate costs affect the cost of doing business in the city. The development of Lower Parel is a lesson in the economic and social opportunities created (and lost) by the real estate market in India.
Till Lower Parel happened, the Mumbai real estate market was dominated by a handful of builders who knew the inner workings of the Brihanmumbai Municipal Corporation (BMC), the city’s municipal authority responsible for granting building permissions. Builders were largely old Mumbai families—the Rahejas, the Hiranandanis, the Wadhwas, and the Shapoorji Pallonjis.
The big brands common in the rest of the country—DLF, Unitech, and the like—were not part of this circle. The Mumbai builders, while they were able to navigate through the BMC easily, did not have unlimited resources, and were unwilling to over-leverage. So, while they built marquee projects, they didn’t splurge on land deals, so prices were largely affordable. (Relative to prices elsewhere in the country, that is. Mumbai has always had far more expensive real estate than much of the world.)
Then came 2005, when the court order on mill lands was finally clarified and builders descended on Lower Parel. The reason for the delay was because the original ruling was unclear, and later, mill owners fought it. The fate of the unused mills was first spelled out in the new Development Control Rules (DCR) in 1991.
A section of the rules, DCR 58, stipulated that a third of the mill land (either open or after demolition of existing structures) was to be given to the BMC for city open spaces (parks and playgrounds), a third would go to Maharashtra Housing and Development Authority for public housing, and the rest could be used for commercial development by the mill owner.
Mill owners refused to part with two-thirds of their property, and the government was forced to amend the rules in 2001, saying that only a third of the open land on which there was no construction was to be distributed as said in the DCR 58 (1991) rules.
By the time the mill owners settled pending dues with the workers and put the land up for sale, it was 2005. Gopal Maheshwari, partner at real estate brokers Maheshwari & Maheswari, draws the parallel between Lower Parel’s development and rising prices. “Around 2006, suddenly Mumbai’s real estate prices went through the roof, climbing by Rs 5,000 per sq. ft. every six months or so,” he says.
Consider this. When Sheth Builders launched Beaumonde, their apartment complex built on Standard Mills land in Prabhadevi in 2005, the going rate was Rs 6,500 per sq. ft.; today, it is Rs 70,000. Sheth paid Rs 130 crore to buy 10.1 acres of mill land in 2004. Ashok Towers built in Central Parel began booking in 2004 at Rs 4,500 per sq. ft. That’s gone up to Rs 45,000 today.
Vikas Kasliwal of Shreeram Urban Infrastructure is building Palais Royale, a super premium tower in Worli where the minimum price of a flat is expected to be Rs 40 crore.
In March 2005, Delhi-based Indiabulls (till then a financial services company) paid Rs 276 crore for the 14-acre Jupiter Mill complex. The company’s promoter, Samir Gehlaut, saw the commercial opportunity in Lower Parel and floated a real estate company as an investment arm. That company went on to spend Rs 775 crore in buying mill land. Gehlaut managed this by bringing in the earliest foreign direct investment (FDI) to the Indian real estate market. U.S.-based Farallon Capital invested about Rs 550 crore.
Aided by the stock market boom and a growing international focus on India as the next economic superpower, developers scrambled for the last swathes of land in Central Mumbai. In the early days of its development, Lower Parel was not seen as a residential destination. Though Phoenix Tower, next to Phoenix Mills, which houses High Street Phoenix, one of the most popular shopping malls in the city, was the earliest tall residential building in the area, subsequent plans were all for commercial buildings. Says Maheshwari: “Lower Parel was thought of as a cheaper alternative to the new expensive financial district Bandra Kurla Complex.”
Then, in 2008, the Lehman collapse and the subsequent global slowdown had their effect on the real estate market. Companies that had leveraged themselves to buy mill land were now desperate to sell. DLF, which had more than Rs 20,000 crore in debt, sold off its Mumbai mill land last year to Lodha for
Rs 2,700 crore. Businesses could no longer afford office space here, and builders turned to the most viable option: residential apartments. And that’s seen the rates for residential complexes zoom (to Rs 70,000 a sq. ft. for Beaumonde, for instance), while rents for office spaces have fallen sharply to Rs 120 a sq. ft. (compared with roughly Rs 250 pre-2008).
Going residential has also changed the character of the commercial establishments in the area. For one, there are more pubs, nightclubs, and fine-dining options, instead of quick-service restaurants. Sri Datta Bhavan, a small tea shop that used to cater to office-goers in Paragon Centre, has had a complete makeover and is now &Chillies, a speciality South East Asian restaurant. Vaishnavi Nalawade, 30, and her two brothers, the third-generation owners of the 300 sq. ft. shop, studied hotel management and worked for upmarket restaurants before converting the tea shop into a spanking new restaurant. There’s a yoga studio and one of Mumbai’s first microbreweries in the Mathurdas Mill compound. The same compound also hosts Blue Frog, a hugely popular live music bar and restaurant.
IT ALL LOOKS arty and buzzing, and bohemian and growing, but some of those in the business are sceptical about the unintended and unthought-out gentrification of Lower Parel. Brinda Somaya, partner at Somaya & Kalappa, a firm of architects, says: “The quick changes in the area have been haphazard. Whether it will remain a tony neighbourhood is hard to say.” She adds that one of her concerns is that the redevelopment of slums in tandem with the growth of ultra-premium property will result in a thoroughly mixed neighbourhood, economically speaking.
The haves and the have-nots in such close quarters could lead to a rise in crimes against the former. In most cities, there’s a clear demarcation between rich and poor. Those boundaries will not just blur, they will disappear in Lower Parel. Which, sociologically speaking, may not be such a bad thing really.
What’s more likely to worry builders is the fact that smart money is staying away from the area. There has been little investor interest, apart from the Farallon investment and Ajay Piramal’s Indiareit Fund.
Private equity investors have been reluctant to enter this area because of the long litigation and the subsequent regulatory flip-flops. Adds Ramesh Jogani, who has over 30 years of experience in the real estate sector, and runs an independent fund: “At the current prices of land and construction, private equity investments won’t flow in easily, as returns no longer look attractive.” In fact, he says, smart money seems to have lost out in Lower Parel. “Dumb money” or retail investors who bought residential complexes early on made a killing.
So, what happens to the concerns about the neighbourhood? Already Gaurav Gupta, director of Omkar Developers, which is building 1973—three (60- to 76-storey) residential towers under a slum redevelopment project—is drawing lines between Lower Parel and nearby Worli, demarcating the latter as more premium compared to Lower Parel’s predominantly upper middle class development.
Maheshwari, who has spent over four decades broking for premium houses, says: “Surely Lower Parel will have its own identity—between old-monied south Mumbai and a happening suburb in Bandra.”