Though the property market in the country’s financial capital has been rife with talk of a slump for some time now, this is the first time figures prove the extent of the slowdown. Information about residential and commercial property sales from the stamp duty registration office show almost 12,000 fewer transactions during the last financial year compared to the year before. From April 2007 to March 2008, 62,595 flats were purchased in Mumbai as against 74,555 in 2006-07.

Analysts said this could be just the tip of the iceberg as stamp duty registration figures indicate the trend only among genuine homebuyers. There could be more of a downswing in real estate investments as people are backing off from the sector in large numbers.

Sanjay Dutt, joint managing director of Cushman and Wakefield, said that annually there has been a 20-25% increase in transactions since 2001. “The market peaked in 2007. There were glimpses of market correction in certain cities by the end of 2007. But it was only in 2008 that realization on the investors’ part and the stagnation that was until now only a perception became a reality,” he said.

Realty analysts say sales volumes are expected to dive further south as developers persist on holding on to their steep prices and buyers anticipate a further fall with current rates being beyond reach. According to Akshay Kumar, managing director of Parklane Property Advisors, the market is in a corrective mode and the downward drift will continue for another 12 months.

“Between 1992-96, the market ran up the same way it did during 2003-07. Post-’96, the volumes dropped by 50%. This time again it is expected to drop substantially though not so steeply. The demand is now extremely sluggish and customers do not want to stick out their necks and transact at prevailing rates,” he said.

In fact, comparative figures for the month of April since 2006-07 show that there has been a drastic 30% drop in transactions this year as compared to three years ago. There were only 5,289 transactions last month as compared to 7,471 in April 2006-07.

Signs of the sluggish market were visible when a recent auction of plots at the Bandra-Kurla Complex turned out to be a damp squib. Just a year ago, a plot of land in the same place had become the national indicator of the euphoric real estate scenario.

“Developers who are not able to sustain for another six months will set the valuation. Prices have peaked too fast over the last six years, so a correction was inevitable. Besides peaking of values, when global factors showed signs of stress even the investors’ segment started withdrawing towards the end of 2007,” said Dutt.

The government, Dutt said, has now started sending signals to an overheated market by taking measures to curtail liquidity in the market and speculation in real estate. “These include controlling the Foreign Direct Investment in the sector as well as imposing higher interest rates. When the market recovers this time, there will be a healthier and steady growth than the quantum leaps we saw until now,” he said.

The recently-revived Bengal Chemicals and Pharmaceuticals Ltd (BCPL) is building a 38-floor sky scraper at Worli in Mumbai overlooking the Arabian Sea. The new office complex at this two acre land in the heart of Mumbai will be ready in about 18 to 24 months.

The company intends to offer the space on a 99-year lease. Potential tenants have already pooled in money for the Rs 300-crore construction, it is understood. Public sector developer National Building and Construction Corporation (NBCC) is assisting BCPL in this venture.

Another state-run company, the Indian Drugs and Pharmaceuticals (IDPL), which is awaiting a revival package from the government is planning to leverage its vast real estate assets in Hyderabad, Rishikesh, Gurgaon and Chennai for developing large commercial facilities like software and biotech parks as well as educational institutions.

The ministry of chemicals and fertilizers is now seeking the approval of a group of ministers headed by defence minister A K Antony for this diversification.

IDPL has about 900 acres of land in Hyderabd, about 1,200 acres in Rishikesh, 80 acres in Gurgaon adjacent to Microsoft’s office and about 650 acres in Chennai, all at prime locations. These assets are considered worth about Rs 50,000 crore, which comes to about twice the turnover of the domestic retail pharmaceutical market.

The government does not want to sell these assets or divest its stake in the company. Instead, it wants to leverage these assets to create commercial complexes so that it would generate revenue without losing ownership.

These government-run pharma companies were making losses because they could not match the professionally-managed private sector companies’ swift decision-making and efficiency in marketing. Secondly, their focus is to provide medicines that are needed for the masses and not to produce high-end drugs that are outside price controls.

The real estate development ventures are likely to give them the much needed resources to meet their social objectives without seeking government assistance.

Malabar Hill, home to the city’s elite and till now the most famous of addresses in South Mumbai, is facing serious competition from Bandra, popularly known as the Queen of the suburbs.

And with many famous people moving in, it’s certainly living up to that name. The latest celebrity to move to Bandra is Sachin Tendulkar, who has bought an old Parsi Villa on Perry Cross Road for Rs 39 crore and he has many other famous people as his neighbours.

Shah Rukh Khan’s Mannat on Bandra Bandstand has virtually become a tourist spot just like Salman Khan’s Galaxy Apartments.

Also by the sea, is Abhishek Bachchan’s brand new home Naivedya on Carter Road while Aamir Khan’s has already been living for quite sometime now.

Even Saif Ali Khan has bought his new home in Bandra. And with the hot shots living in Bandra, can the rest of the Bollywood brood be far behind?

Actor Aftab Shivdasani, a true blue townie in fact, has also recently succumbed to the Bandra bug. “Almost 100 per cent of the work happens in the suburbs. Nothing really happens in South Bombay but it was good place to rest my head at the end of a long day,” says Shivdasani.

Not just the entertainment industry, but business offices and consulates too are now moving to Bandra with great speed.

This, even as the current rate there continues to hover around Rs 22,000 per square foot.

But top real estate agents say new buildings in Bandra are often fully booked even before construction is complete.

Real estate agent Prakash Jain says, “Bandra is a very, very popular destination and the kind of buildings that are coming up, the receptions with swimming polls, gymnasium and gardens etc., you don’t find in South Bombay now.”

According to a Cushman & Wakefield report on Airport Realty, the modernization and upgradation of 47 airport projects across the country is expected to generate 78 million sq ft (1,790 acres) for commercial purposes by 2015.

In Mumbai, about 28% (1.6 million sq ft) of the 132 acres will be for retail, 50% or about 2.87 million sq ft will be for hospitality and 22% (1.26 million sq ft) will be reserved for office space. About 3,200 hotel rooms will come up in mainly five and four star hotels.

The Cushman & Wakefield report said nearly 50% of the estimated 78 million sq ft of airport realty in India will be concentrated in just three cities of Mumbai, Bangalore and New Delhi. These three cities alone will receive about 14 million sq ft of office space and about 10,200 hotel rooms. All over the country, roughly 27,525 hotel rooms will be generated from development of airports.

At a time when the global growth rate of the airport sector has been about 9% per annum, India has seen an average annual growth of 35% over a period of six years. Non-aeronautical revenues are expected to increase from 35% to 54% by 2015.

“As airports have the advantage of 24-hour activity with very high people traffic, they are crucial locations for next generation retail and entertainment centers as well as business and hospitality zones,” the report said.

Last year, a Mumbai developer was awarded the project to clear 276 acres of land under slums from around the Santa Cruz airport. A large chunk of this land will be freed for commercial and retail development.

“Real estate zones in closer proximity to the terminals boast of a location advantage and capitalize on it to command a premium. This obviously goes for land rates, too. However, it does not necessarily make these regions the most expensive,” the report observed.

Reports say the actor-director has offered to shell out Rs 33 crore for the society, Vrindavan, in Santacruz.

Aamir Khan Productions has approached the owners of the society to buy the 22-apartment complex.

Aamir’s willing to buy each flat at Rs 1.5 crore. Apart from Aamir Khan, other developers are also eyeing the property.

The society was built by the employees of the State Bank of India 32 years ago. Reports also say Aamir has been negotiating the deal with the owners for six months now.

On Tuesday, one of its most prominent landmark buildings, Il Palazzo, created a national record after an apartment here was sold at an astonishing rate of Rs 1.20 lakh a square foot — each floor tile more expensive than a Nano car.

The successful bidder was none other than veteran Bollywood star and BJP MP Vinod Khanna and his wife Kavita, who paid Rs 30 crore for the 2,500 sq ft (carpet area) flat located on the 13th floor of the B wing. The Khannas already own an apartment in the C wing of the 21-storeyed Il Palazzo.

The last big sale happened about six months ago when a flat measuring 3,475 sq ft (super built up) in the NCPA Apartments at Nariman Point was bought by a London-based NRI at the rate of Rs 97,842 a sq ft.

The Il Palazzo flat, 13B, is a sea-facing flat with a large living room, spacious bedrooms and a separate servant’s quarter. It was put up on the block by its owner, Citibank, about two weeks ago. The auction took place at the bank’s 7th floor office in the IL&FS building in the Bandra-Kurla Complex at 10.30 am and continued till noon.

There were 12 bidders in all. The auction was conducted by Mrunal Duggar of C B Richard Ellis, a global property consultancy firm.

Among the other bidders, TOI has learnt, was ex-Citibank honcho Jerry Rao and a certain Ms Malhotra, daughter of a former headmistress of a prominent south Mumbai school.

Many of the bidders were residents of Il Palazzo itself. Residents enjoy the first right of refusal. It means they get the first preference to buy the flat if they can match the highest offer.

The building was constructed in 1972 by a prominent Parsi developer of that time. Among the prominent residents of Il Palazzo is stock broker Rakesh Jhunjhunwala, who bought a duplex for Rs 25.25 crore from American Express bank in 2006. Sources said that Citibank has been hiving off its real estate (mainly apartments) all over the country.

In the past one year, it has sold more than half a dozen flats in Mumbai alone. These include a flat each in Meher Apartments (Altamount Road), Kanti on Mt Mary Road in Bandra, Hormuzd off Carter Road, NCPA Apartment at Nariman Point and five apartments at Harbour Heights building, Colaba.

Due to the sub-prime crisis, Citibank has been selling off its assets to shore up its balance sheet, sources said. Since becoming Citigroup’s CEO last year, Vikram Pandit has sold or closed over 45 branches in the US and disposed of the Citigroup’s building in Tokyo.

Recently, he announced plans to sell about $400 billion is assets over the next two to three years. There is growing speculation in Mumbai’s property market that the Citibank building in the Bandra-Kurla Complex may also be put on the block as part of this plan.

At present, real estate and retail funds operating in India are trying to buy into commercial properties to improve valuations. Many funds and developers are exploring options to float Real Estate Mutual Funds in India and Real Estate Investment Trusts in overseas market where higher valuations would help.

The Hafeez Contractor House which is located at Lower Parel in Mumbai, measuring 2.05 lakh square feet. The 35 storey commercial building is designed to cater around 500 companies.

Lower Parel is an emerging commercial destination with players like DLF, Indiabulls, Bombay Dyeing, Peninsula Land lining up commercial properties in the Parel-Worli belt.

Earlier, Orbit Corporation had planned to sell Hafeez Contractor House to The Sajjan Jindal Group.

Later, the Jindal Group dropped the idea and acquired Orbit Corporation’s Kalina land-cum-commercial property for Rs 807 crore. Both parties have been negotiating on a valuation of Rs 25,000 per sq.ft, comparatively lower rate than the prevailing commercial property rates in the Parel-Worli belt, sources said. Currently, developers are selling commercial space for Rs 28,000 to Rs 30,000 in Worli.

Close to 7-8 m sq ft Grade A commercial property is available in Mumbai now, with little additions in last three years. “The under construction projects have the potential to increase the commercial stock many fold and this may soften prices,” said an analyst.

Fresh supply of over 18 mn sq. ft in the CBD and SBD areas of Mumbai will be available in 30 months. Most of the supply is through mill redevelopment and slum rehabilitation.

Officials said it made better business sense to focus on larger formats since the profit margins in convenience formats were too low. The current crop of convenience formats, including Subhiksha, Reliance Fresh and Spencers, are struggling with the challenges of operating a low-margin grocery business in the face of spiraling real estate costs, high supply-chain costs and tough competition from the traditional formats.

Hyper City CEO Andrew Levermore said: “The experiment with the convenience format has been put on the back burner for now. It is clear that the Hyper City format delivers greater returns than the small formats in the retail space, so we have decided to expand Hyper City. We may revisit the small convenience format experiment at some point in the future.” Sources said huge rentals charged by property developers made low-margin businesses unviable.

As a result, retailers are grappling with the issue of delayed property developments and challenges of seizing the right locations at the right price. Industry players say the retail business has been impacted by spiraling real estate costs and a weak back-end and supply-chain.

Currently, the company is accelerating the roll-out of seven additional big format stores this year. Its maiden Hyper City store at Malad in Mumbai has completed two years and the company recently launched a multi-channel, catalogue and internet retailing format, Hyper City Argos. It had set up its first convenience format ExpressCity in Jaipur as a market tester.

In mid-2007, Hyper City Retail had announced plans to roll out as many as 300 smaller grocery stores in the next four years. ExpressCity was to sell vegetables, fruit and food items and the stores were estimated to be spread over 3,500-5,000 sq ft.

The company had announced plans to stock pre-cut and refrigerated fruits and vegetables, apart from refrigerated ready-to-cook food products and 12 meal options as well. After the test-launch in Jaipur, the original plan was to launch four additional stores and then work on a pan-India presence.

“Convenience stores have to be set up at prime locations and be accessible to consumers who are in any case used to the mom and pop formats which offer efficient and quick deliveries. Given the current property rates, it may not have been feasible for Hyper City to operate such stores profitably without getting the locations right,” a source said.