After evaluating its offering on paper and speaking briefly with the management, one can infer that Mumbai has a player to watch out for in Prestige Estates.
I was at the launch of Prestige Estates’ first project in Mumbai on Thursday. It is a project in Central Mumbai called Jasdan Classic.
Normally I avoid launch events since they are often crowded and needlessly glossed up – but this one was different. For starters, Prestige is a heavyweight developer out of Bengaluru and has an enviable track record in execution. Therefore, I was keen to see what they can offer a market like Mumbai. The other reason was my strong belief that only an outsider can shake up Mumbai’s real estate industry.
Perhaps, it’s too early to say. But after evaluating its offering (on paper) and speaking briefly with the management, I think one can infer this – Mumbai has a player to watch out for.
First, the specific contours of the offering: two skyscrapers with an inventory of 233 units. The inventory is of large-sized 2BHK/3BHK/4BHK, priced between Rs 3.69 crore and Rs 9.44 crore, depending on the number of rooms.
The project is located in an area that has other competing credible developers. At the pricing and configuration being offered, it will be very surprising to see the product fly off the shelf – after the initial enthusiasm. In fairness, it doesn’t need to, with the limited inventory in this project.
After examining the location of several other projects in the pipeline across Mumbai, I suspect Prestige Estates wants to send a clear message to the city: “We are here to fight on product and delivery.” That means not competing with matchbox-sized apartments that offer a low ticket-size.
In one way, it’s a reasonable strategy. The small-home, low-ticket size (or as I call it – SHLT) market is crowded. Any and every half-decent developer is playing only on the SHLT theme. With limited ability to provide a quality offering in a given time frame–the only card that is available with this segment is low ticket size.
In contrast, there is little competition among developers focused on product quality. Moreover, the players who specialise in product and execution, such as Oberoi or Hiranandani, often prefer large land parcels that are primarily in the suburbs or outskirts. There is little / no presence of these players in the dense and prime markets of Mumbai. (Although Oberoi will change that in the next 3 years.) Hence there is a vacuum at that end of the market spectrum, which can be filled by a new entrant like Prestige.
The other aim of this location strategy seems to be putting Prestige on the Mumbai real-estate map, in a short period of time. Locations such as Pali Hill at Bandra and a skyscraper at Marine Lines are a clear testimony to that. These are top-notch micromarkets, where land parcels are small and have therefore not seen much activity from branded developers. Similarly, in commercial development, the locations are the prime Mahalaxmi and Bandra Kurla Complex.
The challenges are several as well. The biggest challenge that the stock market seems to be working with is the partnership of Prestige Estates with DB Realty in a majority of its projects. The common view is that compatibility issues are likely to arise.
The other challenge is an issue of historical track record. Previously many developers based outside Mumbai have entered the Mumbai market and – failed. There is one that is struggling even currently after doing a recent launch. I am not sure if it has anything to do with being Mumbai-based or not. In earlier times, the relevance of being from Mumbai was higher as regulations and a cozy nexus mattered more than everything else. That environment no longer holds.
At a competitive level the biggest challenge for Prestige will be at its largest land parcel in Mumbai – Mulund. It is a hyper-competitive market where even Oberoi Realty has struggled. This is the project where Prestige will need to work on an altogether different strategy to succeed.
Perhaps the most under-rated challenge is that of management strength. Mumbai is a new market and Prestige is dabbling with multiple projects at the same time. That requires bandwidth. Additionally, I hope there is an old Mumbai hand who has been employed or is being employed to handle this vast foray.It won’t be easy. But it can be done. For Mumbai home buyers – they should welcome the entry of an ambitious and product-focused developer.
