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Face to Face: ‘Demand exists, but buyers wary’


Though the liquidity situation has improved post the CRR cuts, the real estate market continues to be poised at a crucial juncture with demand yet to pick up, Mayur Shah, managing director, Marathon Group tells Rajesh Kulkarni in an exclusive interview.

What is the total area currently under development at Marathon Group across all segments?

The total area under development at Marathon across the residential, commercial, retail and SEZ segments are 3 million sq ft.

Kindly detail some of your key ongoing projects across these segments?

On the residential projects front, we have Marathon NextGen Era: One of Mumbai’s tallest residential towers at Lower Parel that offers 2 &3 BHK apartments with penthouses on the upper levels.  The landscape has been designed by Singapore-based architects with paved open spaces, ponds and space for events.

Then we have Marathon Nagari at Badlapur (Thane District), about 40 kms from Mumbai. This is an affordable housing project on 49 acres of land and being developed in 5 phases. 

In the commercial projects category we have Marathon Max Phase II, which is a sequel to the existing one launched in 2003. Located near Nahur raiIway station on the junction of LBS Marg and Mulund-Goregaon Link road, this project is ideal for self-employed professionals, corporate enterprises and retail brands. Some of our existing clients here include: Kotak Mahindra Bank, ING Vysya Bank, Indusind Bank, Vector Projects and Orient Shipping.

We are also developing Marathon SEZ Nexzone for the IT and IT-enabled businesses. Spread over 25 acres, Nexzone offers meticulously planned workplaces built on the Walk-to-Work model. The master plan for this plan also includes a residential zone, clubhouse, commercial area, a business class hotel and serviced apartments.   

What is the status of the mill land properties at Mumbai acquired by you to develop residential, commercial and retail projects?

We have always been focussed on acquiring land at low costs at locations that have future potential like the mill lands. We had to settle hindrances like labour issues and wage settlements before completing the acquisition. Using the low cost land bank model we have developed the Piramal mill land properties, while construction activities are ongoing at sites such as those of the Mafatlal and Khatau mills.

What is your assessment of the current market scenario given the demand slump? Will developers be forced to reduce prices to drive demand?

The real estate market is poised at a crucial juncture. In some pockets, there are instances of over-supply, while in others the supply is inadequate. The market is likely to be very different in the New Year. The demand is still there but buyers have become wary. The residential market as such is sentiment driven and still offers opportunities. With the stock market down, it offers little scope for investments and in the light of this the real estate market still offers better opportunities.

A recent survey has predicted an up to 30% fall in property rates in and around the Mumbai Metropolitan Region (MMR) by April 2009. Do you agree?

Any reduction in property prices varies from location to location. The MMR is roughly equivalent to 18 small towns of one million each. Mumbai being an island city cannot be compared with any other city since the availability of land that can be developed is quite limited.

Ongoing projects have borne the brunt of the tight liquidity scenario and negative investor sentiment. How do you gauge the situation?

The liquidity situation has improved after the CRR cuts and the stimulus packages announced by the government. With home loan interest rates softening, sales at certain projects have picked up. We are hopeful that interest rates will bottom out at approximately 8.5% between March and June this year. Concurrently the overall liquidity situation is also expected to improve considerably by then.

How has the ongoing demand slump impacted your projects? What has been your strategy to woo buyers and investors?

Depending on the demand supply at the given location, prices have corrected anywhere between 10-30%. Given the market scenario we have set our focus on projects in prime locations and initiating affordable housing projects to attract investors. In addition to our ongoing Marathon Nagari project that caters to the growing affordable housing segment, we have plans to start similar projects across locations such as Navi Mumbai, Thane and Badlapur in the future thereby creating a bank of about 2000 flats by next year. 

Are you satisfied with the government’s recent initiatives (stimulus package, cut in home loan rates) to encourage growth in real estate? What more can be done?

The government’s recent initiatives have strengthened the sentiments in the real estate sector. The rate cuts announced by banks are likely to have a positive impact on the consumers who were earlier shying away from taking home loans. However we need to extend the lower rates to cover home loans up to Rs40 lakhs to benefit buyers in metro cities such as Mumbai.

The government also needs to think in terms of extending 80-I(B) tax benefits for the next three years and interest deductions up to Rs5 lakhs for homes bought till June 31, 2009. Other steps that could be considered include increasing depreciation benefits from the existing 5% to 25% on commercial properties and the removal of service tax on rental properties.    

Going forward, what will be the key factors responsible for driving the growth of real estate development in the country?  

The entry of corporate players and new/unmet demand will be the key factors responsible for driving growth of real estate development. The rising population is another trigger which will further aggravate the situation. The need for homes is also on the increase due to the growth in the number of educational institutions, IT, ITeS, call centres, BPOs and manufacturing industries.

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