Homing in on the margins

Every day, Prakash Mudrale spends five hours travelling in crowded local trains from his Kamothe home near Panvel to his Worli office.

“Sometimes, I feel I come home just to eat and sleep. There is no life if you are staying in the extended suburbs. Life is really tough in Mumbai,” says the 28-year-old, who works with TEARSON, a firm  that prepares digital content of educational syllabus.

Though Rajesh Tawade’s travel woes are similar to Mudrale’s, he prefers to focus on the positives of living in Kharegaon in Thane district.

A bank employee, Tawade travels every day to his Kalbadevi office. But, the open space and green environs in his housing society makes up for the gruelling travel. “There is so much space for my children to play here. I may face problems while travelling, but at least my family is happy,” says Tawade.

Mudrale and Tawade are among the more than 50 lakh people who have been forced to migrate from the city to the suburbs and even extended suburbs, thanks to the ever-rising property rates.

Two years ago, Mudrale wanted to buy a flat near his Worli office. “But even the rent was so high that I dropped the idea. Later, I thought about moving to the central suburbs, either Mulund or Chembur, but the property rates were not in my budget.”

He finally bought a 1BHK for Rs25 lakh in Kamothe, the new emerging extended suburb. A 1BHK flat would cost more than Rs3 crore in Churchgate and around Rs1 crore in Andheri.

“The common man cannot afford to buy a house in Mumbai. So, they are forced to live in the far-flung suburbs,” says Sandeep Reddy, co-founder of GrOff.com, a real estate brokerage firm.

He added that earlier people would at least enquire about the property rates in south Mumbai and the central and western suburbs. “Now, no one even asks. They are interested in buying houses in Navi Mumbai and Thane only. Even, the NRIs are only investing in these markets,” says Reddy.

More and more people are now moving to Kalyan, Dombivli, Boisar, Vasai, Virar, Titwala, Shahad, Vasind, Ambarnath, Karjat, Pen and Khopoli where a 1BHK costs between Rs15 lakh and Rs25 lakh; and a 2BHK around Rs20 lakh to Rs40 lakh.

To tap this market, developers too have started shifting their base from Mumbai to its peripheral localities to construct the affordable houses.

Red tape, coupled with the suffocating project approval procedure in Mumbai city, has also forced developers to look to the extended suburbs for their construction activities.

In the island city, it takes two to three years to get approval for a housing project. In the suburbs, it takes only a year.

Even the high land cost is a deterrent. In the island city, the land cost is almost 60% of the total cost of the project. Ideally it should be 20%-30%. As a result, projects get delayed resulting in escalating costs and subsequently, property prices. As a result, while construction activity in the suburbs has increased by almost 60%, it is dwindling in the island city at 40%.

The central and state governments have proposed pumping in crores of rupees to improve the infrastructure in these extended suburban localities and have also given 1% rebate in taxes up to Rs15 lakh-loan in cases where the flat cost is not more than Rs25 lakh.

“This rebate benefit can be used only in the extended suburbs because one cannot even buy a hut for Rs25 lakh in the island city,” says Manohar Shroff, managing director of Shivan Builders.

In the last few years, many corporate and industrial units have shifted their offices from Nariman Point to Bandra-Kurla Complex, Andheri, Thane and now to Vashi, Belapur, Mahape and Panvel.

Ramesh Prabhu, chairman of the Maharashtra Societies Welfare Association, admits that the construction industry’s focus has shifted.

“At present there is affordability. But seeing the increasing demand, the developers will start jacking up the property rates and these affordable locations will soon become unaffordable,” says Prabhu.

Major builders enter periphery In the past, real estate in the suburbs and extended suburbs had been dominated by local small-time builders. But, the population boom in these areas has lured major developers.

Lodha Group, Godrej Properties, Wadhwa Developers, Kalpataru, Mantri Group, Marathon Group, Indiabulls Real Estate, Hiranandani Construction, Puranik Builders and Hubtown, all known for their high-end and luxury housing projects in the city, are vying to corner land in the extended suburbs and launch integrated township projects.

“It is always profitable for developers to set up projects in these locations as construction and labour costs are comparatively lesser than in the city. We spend less on transport and land and even the approval process is not as cumbersome as Mumbai city,” says Sunil Mantri, managing director of Mantri Group and chairman of the Indian Merchants Chambers (real estate).

Pranay Vakil, chairman at Knight Frank, India, says: “There is hardly any land left in the city and the textile mill lands are already sold out. So, those living in central Mumbai are shifting to the north-west.

Soon, Panvel, Karjat and Boisar will be developed into Navi Mumbai-like satellite cities. The state government should focus on connecting these extended suburbs to the city by rail, road and even the sea,” he suggests.

Explaining the arithmetic behind low-cost housing projects, Vakil says developers prefer to spend 15% to 20% on land, 60% on construction cost and make 20% to 25% profit.

“This formula is working in the suburbs and extended suburbs now. Therefore the developers are able to construct low-cost houses there,” he adds. 

Transformation may take time
Pankaj Kapoor, managing director of Liases Foras, a real estate research firm, feels it will take years for the extended suburbs to turn into satellite cities. And, this transformation will not be a smooth process, he adds.

“People are being forced to live in the far-flung suburbs. The social fabric is not yet developed there. Staying in the extended suburbs means spending most part of the day commuting,” Kapoor says.

Many investors have also bought large tracts of land in these areas at cheap rates.

“Now, they want to sell these unknown locations by claiming they are close to the proposed international airport and metro services. But, it will take more than 15 years to get metro and sea connectivity in these areas. These are just gimmicks to lure the common man,” Kapoor says.