COMMENTARY
INTERVIEW
SPECIALS
CHAT
ARCHIVES

Golden square mile loses glitter

Once upon a time, Nariman Point in south Bombay was called the 'golden square mile'. Then, property prices in this area matched the cost of gold.

However, the story has changed today. Rents in this area are only around Rs 100 to Rs 130 per square foot now as against the Rs 250 per sq ft quoted some three to four years ago. While offices were sold at Rs 20,000 per sq ft, today, rates are no more than Rs 12,000 to Rs 15,000 per sq ft, depending on the building, size of the office, floor, location, view from the office, etc.

A broker at a real estate business firm in south Bombay said prices were unlikely to go up for another year or so. He said the rate in Nariman Point in 1978-79 was between Rs 650 and Rs 700 per sq ft, which later went up to Rs 2,000 to Rs 2,500 per sq ft. While many thought the prices would stagnate at that level, they went through the roof in 1992-93, being quoted at Rs 20,000 per square foot. Prices were so volatile in those days that they would change on a day-to-day basis for the same property.

A primary reason for the increase in prices was the belief that in the wake of economic liberalisation, foreigners and non-resident Indians would set up offices in Bombay and making financial investments in the country.

Over 3,000 to 4,000 companies registered in India after liberalisation, raising hopes. However, these were shattered with barely 500 companies actually coming in with investments.

The situation was very similar to what happened at the stock exchange. Over 120 foreign institutional investors are registered with the regulatory authorities, but barely 10 to 12 are operating. The funds and companies are still shy of India.

Most people prefer taking property in Nariman Point on lease. Buying property entails huge interest rates of 18 to 19 per cent, at which amount they they can anyway safely lease take a place on lease.

Many Indian corporations have also shifted out of Nariman Point when prices were skyhigh, especially to the newly-developed areas of Parel and Worli. To make matters worse for companies, the last two years have seen little growth, and Nariman Point would be out of reach for most of them even at today's price slump.

However, real estate firms insist that today's prices are the correct ones. The overheated prices of post-liberalisation had to come down, and would have dropped faster but for the resistance on the part of the sellers, who today are likely to hold the present price line for at least a year.

The only buyers today are foreign companies and government institutions. Nariman Point still remains a prestigious address though. More than a 150,000 sq ft area lies vacant today.

The situation at Nariman Point also reflects the situation in the real estate market in the rest of Bombay. Real estate is not conducive from an investment point of view, but it is the right time for individuals or corporates to make their purchases.

"While prices are stagnant, a further reduction is unlikely," says one broker. "They have been stagnant for the past two months, having come down by 40 to 50 per cent over the past two years."

Compiled from the Indian media