Once again the Mumbai market has professed surprise at the price which Manohar Joshi-Raj Thackeray paid for NTC's Kohinoor Mill no 3 and Indiabulls Property for Elphinstone Mill -- Rs 421 crore (Rs 4.21 billion) and Rs 441 crore (Rs 4.41 billion), respectively.
A source close to the Joshi family indicated that the combine is not planning a residential development on the newly acquired property.
"It will be a commercial development as building a residential development on a per sq ft investment of Rs 15,000, is not viable." The source did not rule out the possibility of a retail space being built on the mill land.
Price in Rs crore
Said Tariq Vaidya, head of the Asia Pacific researh wing of realty analysts Knight Frank: "The pure municipal RWI based bid for the Kohinoor Mill property works out to Rs 14, 808 per square foot. The loading of built up space (rather than carpet area) allows the developer to scale down his cost per square foot to Rs 11, 000 per square foot (the maximum he can load on is 40 per cent upon the carpet area)."
"However, even this cost would escalate after the addition of five per cent stamp duty, around Rs 2,000 to Rs 2,500 per square feet construction cost as well as interest and holding cost that will bring the cost up to the Rs 15,000 per square foot market," he added.
Vaidya said, "To make the plot commercially viable as a retail mall (which seems to be the intended use of the property) the developer will have to sell it at around Rs 20,000 per square foot post development."
Similarly for the Elphinstone Mill property that has been bagged by the Indiabulls Properties the per square foot cost on the municipal FSI for the firm works out at Rs 9,800. (Rs 441 crore divided by total area of the mill -- -38,000 square metres).
Mumbai city has been witnessing a retail boom with as many as 55 large malls expected to come up in the Mumbai metro region by 2010. The central Mumbai area already has two mega malls -- Phoenix High Street and Cross Road, the country's pioneer in the segment.
With four to five more malls expected to come up in the same area, this is now emerging as a prime shopping area, rivalling south Mumbai and suburban shopping destinations such as Bandra, Andheri and Jogeshwari -- Malad Link Road all of which have a clutch of malls.
Delhi realty major DLF which hit the headlines last month when it bought the 17.8 acre Mumbai Mill property for Rs 702 crore (Rs 7.02 billion) is expected to build a luxury hotel and mega mall on the property.
Much of the speculation, say industry sources, has been fuelled by the expectation of Foreign Direct investment in retail.
"Since FDI will come into retail one way or another, the developers are picking up property with a view leveraging it when the big daddies of retail such as Wal-Mart come into India," said I P Singh CEO of Ishanya, a Pune-based interiors' mall.