With three major infrastructure projects – Metro Line 3, Coastal Road and Mumbai Trans Harbour Link – on the verge of getting commissioned in the coming months, old Central Business District (CBD) comprising Nariman Point, Cuffe Parade, Churchgate, Colaba, Ballard Estate and Fort is all set to see a major revival. However, the ambitious plan can fully materialise only if these mass transit infrastructure projects are supplemented with an investment of around ₹200 crore for the redevelopment and retrofitting of existing old buildings in old CBD to make them commercially viable.
These are the findings of a recent study conducted by Colliers, an international property consultancy firm, on the impact of new infra projects on Mumbai’s real estate. Around 2.3 million square feet area space in old CBD is available for upgradation and retrofitting, said the report, adding that the main demand drivers of this leasing change will be consulting, technology, and Banks and Financial Services and Insurance sectors.
Office rentals to appreciate by 5-10%
The upgradation of Express Towers at Nariman Point is a prime example of an existing structure getting retrofitted to meet the new age occupier. Talking to Free Press Journal, Colliers Research Senior Director Vimal Nadar said, “If this (retrofitting) happens, office rentals of Grade A stock in CBD, which have remained stagnant for the last several years, will gain traction and appreciate by 5-10%. Office leasing, which was till now negligible, will pick up by 10-15%. Consequently, property values and rentals will also shoot up.”
The office rentals in the old CBD have remained stagnant for the last 15 years on account of north-south connectivity issues, lack of parking space and the emergence of the Bandra-Kurla Complex (BKC) as the new CBD. “Corporate offices, banks, financial services and even the Diamond Bourse have shifted out of CBD to BKC, Lower Parel, Worli and Mahalaxmi as these areas became more relevant, offered cheaper and better facilities, and smart office spaces to the new age buyer. With suburban rail being the only lifeline of Mumbai, north-south connectivity was a big issue,” Nadar explained.
According to Advocate Dr Harshul Savla, Managing Partner, M Realty, old CBD has been a sleeping giant for over two decades now. SoBo’s heritage charm lost out to the BKC and Lower Parel. “But now I see the Coastal Road project waking this giant up and proving to be a comeback point for this market,” Dr Savla added. In recent years, the old CBD has not seen any new office space additions, which in turn, has resulted in paltry visibility of ready-to-occupy Grade A offices. Most CBD stock consists of old buildings with smaller floor plates which require a facelift. “One of the main reasons for demand slackening in the old CBD has been attributed to low quality inventory. Herein lies the opportunity for retrofitting and redevelopment. This can be done by various stakeholders, including developers, landlords, investors and private equity firms,” Nadar said.
"A new lease of life into old CBD"
Reacting to the report Keval Valambia, CEO, CREDAI-MCHI maintained that there is no denying that upcoming infra projects will breathe a new lease of life into old CBD. “I see south Mumbai evolving as a residential hub. There are a lot of old buildings in the CBD, which will get a facelift and the prices will register a big upswing,” he said. Valambia underlined that the government will have to extend help to revamp old CBD by rationalising premiums to make real estate viable in the island city. Mumbai has the highest approval costs in the country. “For example, a developer in Mumbai pays ₹54,221 per sq m as approval cost to the BMC whereas in Delhi, the rate is ₹2,166 per sq m. In Chennai, it's ₹5,466 per sq m, ₹1,145 per sq m in Bengaluru and ₹1,071 per sq m in Hyderabad. Once these premiums are rationalised, real estate will get a boost and prices will become affordable,” Valambia asserted.
He concluded that the government must also push for making SoBo a tourism magnet, given its art deco and heritage buildings. “Lets not forget that Mumbai still attracts the highest number of tourists. This will only add value to old CBD,” he said.
