Increase in high rise building projects
With growing pressures on space, major urban cities like Mumbai, Singapore etc. will have to expand vertically, and we will see a growing trend of demolish buildings as high as 20 floors to construct skyscrapers of 40- 50 floors on the same piece of land. Another driver is how the city planners are thinking and the kind of FSI available for construction / development. FSI available in Delhi is lower than that in Mumbai, so authorities are supporting such tall buildings in Mumbai.
However, the rates are high and go up per floor due to the premium / preferred location charge (PLC) that you pay for going higher and for better views. Also on the other side there are challenges to be managed which have slowed down the pace of developing these tall towers. There are limited capabilities, experience and work force trained to construct such tall towers available in India, so we rely on expertise from overseas, which comes at a high cost. There is also need to provide related health and safety provisions, and hence the time taken to coordinate all the above puts pressure on the timelines.
Additionally, such tall buildings put a lot of pressure on civic infrastructure per square meter like sewage, water etc. as well. Funding for such developments would generally happen through a mix of private equity and debt and they would be willing to put in the money if their evaluation projects returns, driven by demand / supply gap. Hence, as long as this gap remains, premiums will be charged and investments will happen.
By Sumchit Anand, Director, Protiviti Consulting