Demand for more commercial space in Mumbai will come from the banking sector, says Mayur Shah of Marathon Group
Probably the only real estate developer in Mumbai offering office space from 1,500 sq ft to 80,000 sq ft (on a single floor plate), the Marathon Group has managed to ride the slowdown in commercial real estate by pioneering the concept of small office spaces for start-ups and large floor plates for multi-national companies in the city.
The group has over 20 million sq ft of residential and 1.2 million of commercial space under construction with a land bank of over 500 acres.
In a chat with Business Line, Mayur Shah, Managing Director, Marathon Group, spoke of the travails of the commercial segment where prices have remained unchanged since 2007 in the upmarket area of Lower Parel, here. Excerpts:
Do you see a revival in the commercial segment?
We are seeing signs of revival and the general elections may provide a boost. A lot of policy related decisions such as bank licences are to come. We foresee a demand for two million sq ft in the BFSI sector alone. Each of the new banks needs to accommodate 500 to 1,000 employees to start with.
Prices have not moved in Lower Parel from the ₹17,000-18,000 a square foot and fresh supply is unlikely in the current scenario where land cost alone accounts for ₹14,000 a square foot.
I see a five to 15 per cent rise in prices over six months after the general elections and subsequent improvement in the economy.
What about vacancy levels?
Vacancy levels have dropped from 40 per cent to about 22-27 per cent as no new construction is on here. Rentals are close to ₹160 a square foot.
How did you manage your projects given the weak demand?
We tapered supply to ensure funds are not locked in. We built seven floors first, then 14 and are moving on to 24. Loreal has 70,000 sq ft in our building and that too on a single floor — the eighth.
We offer 1,500 sq ft to 80,000 sq ft across projects. Large single floor plates do have a 15-20 per cent advantage and clients have understood that.
We have calculated that the advantage of 50,000 sq ft single floor over the same area spread over five floors works to 15-20 per cent.
The savings come from reception area, meeting rooms, boardrooms and toilets.
The residential side is also reeling under poor sales…
The credibility of a developer is important. We do not see issues in the ₹3-5 crore range in the city as also the below ₹1 crore in the suburbs.
It is the middle-income group, which is in trouble as credible supply is not there. A 40-50 storeyed structure takes 4-5 years to complete and the developer’s credibility plays a huge role.
How do you see the Housing Regulator coming up in the State?
In short, you will see reduction in supplies and consequent price rise.
The licensing and disclosures will make the fly-by-night operators go away — which is good, but it will also make working difficult for others. The escrow clause of 70 per cent (lock in of sales proceeds of the project) is an impediment.
One must sell, only then construction will happen. The flexibility that aggressive developers with large portfolios, like us, had would go as funds cannot be diverted.
The good part is that the Act has clarified that developers can allocate car parks. Similarly, it has clarified on carpet area and issues concerning what can be sold such as attached terraces.