Mumbai: When Vikram Pandit, the former CEO of Citigroup, purchased a flat in Signature Island in Mumbai’s posh Bandra Kurla Complex (BKC) in 2013, it made news.
However, Sunteck Realty Ltd, which launched the Signature Island project in 2007 is yet to sell all the high-end apartments in the project, with the prolonged slump in the country’s real estate market hurting the luxury segment the most.
The developer is now planning to lease out 10-15% of the flats at its Signature Island inventory and helping clients, who have already bought flats in the luxury project, rent out their individual properties.
Sunteck is one of several developers in Mumbai and the National Capital Region (NCR) looking to lease out their unsold high-end apartments to executives and foreign nationals looking for a home but do not want to purchase.
“Our first priority is to help lease out for our clients who want to earn rental income but we might also be looking at leasing out a few of our own inventories which we have held back to sell it later when the price appreciates,” Kamal Khetan, chairman and managing director, Sunteck Realty Ltd told Mint.
“There is limited supply for luxury apartments or high-end residential buildings around BKC. Rentals are rising every year and with the kind of celebrated gentry we have, prices of our property are likely to shoot up. So, we are holding a few apartments, but why should we leave it vacant and keep it idle? We will get some rent on it,” Khetan said.
A similar strategy is being adopted at its other two properties in BKC—Signia Isles and Pearl.
According to real estate consultants, sales of luxury homes, particularly those under construction, have slowed significantly the last couple of years. As per a 3 May report by Liases Foras, a real estate research firm, sales of luxury apartments declined by 20% in the quarter ended March from the year-ago period.
Renting out some of the unsold inventory would earn short-term cash for builders while they wait for the right buyers, the consultants said.
“Developers do try to rent out their ready-to-move apartments in the luxury segment. Rental yields are one of the best in Mumbai. They are looking to rent out to corporates who are trying to do some bulk deals and use those apartments as a guest house for some of the top executives. There is potential there,” said Ashwinder Raj Singh, chief executive officer, residential services, JLL India, a property consultant.
Kalpataru Ltd, another Mumbai-based developer, has been leasing out some of its luxury apartments at Worli and other locations in the city, according to two people aware of the development. A spokesperson for the company declined to comment on the story.
Amarjit Bakshi, founder and managing director of Central Park said many foreign nationals working in the area are looking for luxury apartments for the short term.
“With the inflow of foreign investments, we believe that a lot of foreign investors are likely to come to the country. And when they come, they are not in a mood to buy but look for something which is absolutely ready-made, secure, furnished and free from all hassles. So, we felt a leasing model can be very suitable for a place like Gurgaon,” Bakshi said.
The company currently sells luxury apartments ranging 4000-16,000 sq. ft with prices going up to Rs.32 crore.
Not everyone is convinced that the model will go very far in easing the pressure on luxury developers. Reducing prices to sell flats may be a better option as compared to short term fixes, said Sam Chopra, founder and chairman of RE/MAX India, a real estate brokerage firm.
“There are enough buyers for ready-to-move in completed luxury projects, but the only thing is they have to reduce the price and has to be realistic with it. However, leasing out residential property is a sign that developers may be struggling to sell away at the moment,” said Chopra.
Credits Live Mint