The opportunity landscape of reviving distressed assets in Mumbai for realtors

In the last decade or so, India’s financial capital – Mumbai, commonly perceived as the city that never sleeps, has also emerged as a city perpetually under construction. Given the city’s high population of over 12.7 million and population density of 21,000 per square kilometre, real estate developers are struggling to detect vacant lands, leaving little to no room for fresh development. As a result of this, Mumbai’s real estate landscape is soaring into the sky instead of widening horizontally, thereby multiplying the construction of high-rises.

Add to this scenario the fact that Mumbai has an architectural legacy stemming from more than 2000 years, from old stone-carved temples and historical monuments to graceful heritage apartment buildings; most of which are on the brink of collapse due to yearly monsoon misery. Surveys suggest that Mumbai is home to at least 33,000 housing societies that span over five to six decades and are at a severe risk of extreme events or disasters. Taking into account this large-scale problem, real estate developers are cashing in on the distressed assets and focusing on their revival, holding the resolve to our city’s housing problems.

Besides identifying the project under risk, its potential of revival, and future commercial value, there are many other factors that developers must bear in mind. Following are some of them:

1. Channel credibility:
Considering the scale of Mumbai’s distressed assets market, recognising a trustworthy source offering the proposal for a revivable project is of paramount importance. The onus of ensuring that the project to be undertaken proves profitable for both builders and investors lies with the channel partner. What is even more crucial is ascertaining that distressed asset is in a condition to be rejuvenated, involves manageable risks, and will potentially generate lucrative returns.

2. Legal assessment:
Countless projects, especially heritage properties, can often be found stuck in legal battles where proceedings are still underway. In such scenarios, it is important to evaluate the nature of legal disputes, the potential timeframe required to settle them, and a probable resolve to safeguard the future investment of customers. Using external advisory, a thorough legal analysis of the stressed asset to be turned around must be conducted to identify solutions.

3. Physical inspection of the property:
Soon after a project is shortlisted and examined from a legal perspective, the next step is to do a detailed inspection of the property. This helps the developer understand the premises, the market value of the property, and the depth of development needed. Preparing a detailed report consisting of these details will help at the time of bidding on the project to investors in near future.

4. Financial planning:
The probability of a project’s success highly depends on whether or not it is scalable and how much revenue it generates for both the developer and the customer. Here is when having a report comprising details of the asset, such as property age, land area, and its existing market value helps to estimate the property’s future value and total redevelopment cost.

Ali Kochra
Chairman and Managing Director, Kochra Realty

5. Project management:
Once it is determined that a stressed asset is revivable, it is essential to understand customer expectations, strategize a marketing plan, and create delivery timelines. Managing timelines not only streamline the project delivery process but also helps gain customer trust. When delays occur, it evokes a sense of insecurity and dissatisfaction among customers, which can influence project sales and business reputation.

Mumbai’s real estate market offers abundant opportunities for developers of distressed assets. The key is to identify the right one that holds the power to benefit everyone in the ecosystem – the developers, investors, and customers.

Disclaimer: The views expressed in this article are those of the author and do not necessarily reflect the views of the Economic Times – ET Edge Insights, its management, or its members

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