As a long-time witness to scores of real estate projects in Mumbai over the years, I have reduced the number of visits to new projects. Part of the reason is that there is hardly anything new to choose from because of the sharp reduction in launches. More importantly, today almost all projects look the same in Mumbai.
Yet, I was tempted by the marketing blitzkrieg by Godrej Properties to promote its newly launched project — Godrej RKS. Few projects in the past five years have had such an omnipresent impact as this upcoming Godrej property.
It is hard to miss a Godrej RKS ad these days. One can see it at airports, bridges, social media etc.
The project piqued my curiosity. Wasn’t real estate in the dumps? So I visited the project in Chembur last week. Chembur is one of the few locations in Mumbai that has gained disproportionately over the past five years due to improved infrastructure connectivity.
Godrej landed the project by a quirk of fate. A fire broke out in September 2017 at RK Studios, a landmark in the eastern suburbs of Mumbai. After abandoning all thoughts of restoring the studio, the Kapoor family sold its 9,655 sqm plot to Godrej Properties for Rs 250 crore.
Keeping the purchase price and the Godrej brand into account, I expected the project to be priced at a premium. The price is actually audacious.
I understand where Godrej gets its confidence, even if real estate is showing signs of stress every day. This is, after all, a builder that managed to sell its Trees project, spanning more than 34 acres and 1,000 flats at the isolated Vikhroli at prices that are difficult to obtain today even at upscale locations such as Malabar Hill and Bandra.
Can Godrej repeat that success at Chembur? Let me stick my neck out and say that it has got a winning formula.
First, the details of the offering:
- Plot size: 2.2 acres
- Number of Flats: 142
- Size: 1,300 sqft carpet
- All-in price: R 6 crore
- Price / Sqft: Rs 42,000/sqft for builder and Rs 46,000/sqft for buyer
- Amenities: Half Olympic size pool, gym, squash court, children’s play area, multi-purpose hall.
Social media has been abuzz about the pricing that Godrej has set for the RKS project. I see some merit in the view that the price is steep. What Godrej is asking its customers to pay at the launch stage is at a 50 percent premium to most other ready projects in Chembur.
But note that Chembur is a market starved of branded developers. Hiranandani has constructed a project in that area but I can bet that the developer is not proud of it.
The one player that has made a mark in the locality with quality construction is Tridhaatu. The projects cost about Rs 35,000 per sqft, or around Rs 4 crore for a 1,200 sqft carpet area.
Compared with this little-known local developer, Godrej RKS offering is at a 20 percent premium. Godrej RKS also boasts amenities (albeit, limited) that are a rarity in other projects.
The two big reasons for the shocking reaction to the Godrej pricing are frankly configuration and location. The bigger the apartment, the bigger is the ticket size.
When large swathes of apartments are reduced in size to fit a certain psychological price point, RKS has dared to buck the trend. The median carpet size for a 3BHK apartment these days in Mumbai is around 1,000 sq ft. In the case of Godrej RKS, a small 3BHK measures 1,300 sq ft while other configurations are 1,500 sq ft.
That means sales won’t be easy. At the price Godrej is charging, projects across premium locations open up.
It is no secret that tony locations in Lower Parel, Worli and even parts of BKC have seen rates drop to as low as Rs 35,000 a sq ft as inventory continues to pile up with little demand. Apartments of 1,950–2,000 sq ft in Omkar’s 1973 project in Worli are available at Rs 7 crore. Apartments of 1,200–1,300 sq ft at 101 Worli at Lower Parel can be availed for around Rs 5.5 crore.
In such a landscape, will there be demand for such a project in the eastern suburbs?
The RKS project holds an advantage. Unlike luxury projects by Oberoi in Mulund and Piramal Aranya in Byculla, who got their products wrong by focusing only on a heavy supply of large apartments at steep prices, Godrej RKS has only 142 apartments to sell over four years in a location that has a scarcity of branded developers and is today the connectivity hub of the city.
For the launch, the company has initially — diligently — focussed on a configuration that is geared towards 3 BHK and above. The reason I use the word ‘initially’ is that it does have 2BHKs as part of the plan but that is not up for sale currently.
Data obtained from Real Estate Regulatory Authority show that there will be 25 flats of 537 sq ft carpet area as part of the 2BHK inventory. ((I am though not clear on the strategy of having large configuration 3BHK’s and compact 2BHK’s in the same project). For the moment though, walk in only if your budget permits you Rs 6 crore and above.
Clearly, there is a conscious decision to keep the positioning exclusive by holding the smaller flats for a later date. That ambition requires courage in this depressed real estate market.
Yet, I do sense anxiety given the weak show so far. Discounting is on the table. Godrej has even resorted to the tried-and-failed model of engaging with celebrities for pushing sales.
The initial response has not been enthusiastic, according to what I have gathered. The headline pricing has made potential buyers uncomfortable.
In a column in November 2019, I had showcased with overwhelming evidence that brand ambassadors are irrelevant for sales. The weak and vulnerable builders typically opt for them and see little or no benefit.
Godrej is a big developer like Hiranandani and Oberoi that have rarely needed celebrities to coax buyers. For the Chembur project, Godrej has roped in director Karan Johar to spearhead a social media campaign.
It won’t work. And it’s not necessary.
Once the marketing blitz is done, Godrej must focus on educating buyers on the value proposition as well. Too much of a focus on exclusivity has brought down many projects.
If it succeeds, and I am betting it will, it would have shown once again that luxury housing is not the preserve of a particular location but a particular project.