Redevelopment projects are a huge opportunity in Mumbai real estate market: Hiranandani Group

"Half of Mumbai city has the potential for redevelopment of its real estate" says Akshay Kumar, CEO of Park Lane Property Advisors in an interaction with CNBC-TV18. He adds "most of the construction in the city took place in 1970s, 1980s and 1990s and hence is many decades old". So the redevelopment in the city has huge potential especially in central and south Mumbai.

Some affluent pockets of central suburbs are undergoing redevelopment projects. Thanks to the state governments being proactive, approvals for these redevelopment projects within Mumbai are received faster than earlier. Mahindra Lifespace has in April bagged an order for redevelopment project in Mumbai suburb Malad with a revenue potential of Rs 850 crore. In January, the company bagged 1.27 acre residential redevelopment project in Santacruz, Mumbai.

Niranjan Hiranandani, MD of Hiranandani Group says large number of societies in Mumbai are coming up with redevelopment projects mainly because the Floor Space Index (FSI) for redevelopment is up to four times higher today. Hence buildings that re more than 30 years built, are interested in redevelopment.

Hiranandani expects large number of redevelopment projects in Mumbai, a city with high resale value of properties. Redevelopment projects today contribute 2-3 percent of the total supply in the city which is expected to rise over a period of time to 10-15 percent.

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Time required for completion of a redevelopment project is high due to delays in receipt of permissions from society residents, building approvals, environmental clearances, etc. Kumar as well Hiranandani agree it takes about two years for negotiation with the society's existing residents and is the major roadblock in a redevelopment project. "The new construction is less of a hassle, than receiving society residents' approvals for getting the property redeveloped" says Hiranandani.

Kumar says projects like these are much more profitable for developers. Hiranandani group is looking at entering this segment in the next 3 to 6 months.

Real estate stocks have begun their dream run in the past one month with Nifty Realty up 14 percent.

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