The Maya of Mumbai Real Estate Deals

It's a season of contradictions, and manipulations. While those with excess money are splurging on apartments, others despite their money, have nothing to own. The skewed Mumbai apartment markets has become a haven for either the super-rich or the denizens of the slums.

The real estate market, perched on a precarious ledge, is about to topple, but this does not mean there is respite for middle-class home buyers. And this means, that unlike 1995, the real estate industry is using all the ammunition in its arsenal, to make sure that the illusion of real estate industry growth persists for some more time.

Citibank, in a bid, to shore up money for its beleagured US operations, is selling all its expensive properties in Mumbai, and at the same time film actors and finance company executives are moving their excess cash in to apartments and property.

Vinod Khanna, yesteryears's film actor and Osho devotee, has paid Rs 1.2 lakh a square feet for an 2,400 sq ft apartment in Mumbai's Malabar Hill building, built in 1972, called Il Palazzo. The apartment, whose total cost is Rs 30 crore, was sold by the usual suspect Citibank. The sale was done at an auction held at its office in Bandra-Kurla Complex, and particpants included former Citi India chief, Jerry Rao, and others. As the reporter quipped, each tile of this apartment is more expensive than a Nano car. Il Palazzo has another famous resident, i.e. Rakesh Jhunjhunwala, who purchased an apartment for Rs 25 crore in 2006.

Citi has been on a selling spree of Mumbai apartments since 2007. It had also sold an apartment in the NCPA Building, Nariman Point, for Rs 97,900 a sq ft to a London-based NRI. Unrealted to Citibank, an apartment at Rs 90,000 a sq ft, in Usha Kiran, another 1970's building on Carmichael Road, which is in the same area as the new Mukesh Ambani tower, Antilla. The sale was supposedly made to an executive of Indiabulls, as mentioned by the owner Nirmal Zaveri, of Tribhivandas Bhimji Zaveri, for Rs 27 crore, but there have been no confirmations on the identity of the buyer. Zaveri himself plans to move to a neighboring and cheaper Villa Orb tower, where rates are at Rs 55,000 and Rs 65,000 per sq ft.

Aamir Khan, has agreed to pay Rs 33 crore, to pick up an entire housing society building in Santacruz, Mumbai. His objective: build an entire studio on the plot. The society was built around 32 years ago for SBI employees. There are 22 apartments in this complex, and each would get Rs 1.5 crore for their 730 sq ft home.

In another development, Barclays Bank, negotiated a lease deal of Rs 1 crore a month, for occupying 15,000 sq ft, in CeeJay House, Worli, the rent working out to Rs 745 per sq ft. Barclays already occupies 60,000 sq ft, in the same building, but there is no comment on whether this previously occupied space is owned or leased. Further, the current lease details have not been specified, hence any add-ons, freebies, or back-end rebates in cash, cannot be detected.

The magicians of the real estate business, providing back-end rebates, cheap funding with interest rate write-offs, and other tactics, are creating the ultimate illusion for the local-train traveler, that housing is the best business to put their money in to. Unfortunately, one just needs to check the sources of funds, to realize how the net cost of the apartment sold and rented is actually far less than what is made public through newspapers.

P.S: There appears to be a huge demand for buildings around 30 years old. This appears to be a common thread through the entire Mumbai belt, and considering that apartments are being picked up by politicians, finance company heads, and film actors, it appears that some Maharashtra government ruling is expected for redevelopment of buildings over 30 years old.

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