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Nariman Point Regaining It's Lost Sheen?

Monday, April 20, 2015
By Mayura Shanbaug

Rentals at Nariman Point are equivalent or 10% lower than rentals at Lower Parel and 35% lower than rentals at BKC

With the advent of newer business districts like BKC , Andheri-Malad and Thane-Navi Mumbai and the mass exodus by corporates and MNCs, Nariman point as a business district was completely written off by experts and corporates alike a few years ago. But with infrastructure developments planned by the government such as coastal road, Freeway, and Metro phase III, many believe that this Manhattan of India will get its glory days back ...while others debate that with its old structures and multiple ownership patterns, it would never be able to offer what corporates want. At best it could become one big residential enclave for the very rich...they argue.

Ramesh Nair, COO, Business & International Director, JLL India beleives, Nariman Point may never regain its lost glory as the premier business location it once was. “What it can become is a prominent business district for Industry specific clients,” says Nair.

“It is apparent that Individual owned CA firms which are already established will not move away from this location, since the proprietors own their offices and do not lease them,” argues Nair. “Law firms involved in extensive litigation and in need of being close to the courts would prefer this location to BKC and Lower Parel, primarily driven by its close proximity to the high court,” he says.

According to him small start up firms looking for smaller offices may well prefer Nariman Point to other locations since they are unlikely to get affordable 500 sq. ft offices anywhere else in the city.

Another factor that goes in favor of Nariman Point is lower rentals. “Rentals at Nariman Point are equivalent or 10% lower than rentals at Lower Parel while they are 35% lower than rentals are BKC,” says Nair.

The best buildings at Nariman Point command rentals of INR 275 – 300/sq. ft on carpet Area, by comparison the rentals in lower Parel & Worli for the best buildings are INR 300 – 350/sq. ft. whereas there are buildings in BKC which fetch a rental of over INR 450/sq. ft on carpet area.

There are other positives for Nariman point which may still put the area in the race like: the proposed Coastal Road will certainly lead to increased traction at Nariman Point, setting up a metro line that ends at Cuffe Parade will mean greater accessibility from here to Churchgate station (which would otherwise require taking a taxi) and rapidly decreasing rentals will also account for an increase in demand for offices at Nariman Point.

Nobody can deny that Nariman Point has good connectivity via rail with both Churchgate and VT Station in close proximity. It is also a strategic location with the High Court and Mantralaya (seat of Parliament) within walking distance. Close proximity to Luxury Residential areas of South Mumbai like Napean Sea Road, Breach Candy, Cuffe Parade. It has good infrastructure with Trident Hotel, Inox, good restaurants, and closeness to the sea. Another positive is easy access to large Indian Corporates like Reliance and Tata, as well as smaller scale HNIs.

Arvind Jain, Managing Director, Pride Group emphasizes that Nariman Point's problem is not connectivity, which is definitely now being addressed by the various new infrastructure projects now being put in place. “The primary problem is that most of the commercial buildings in this area are very old, and offer none of the modern facilities available in other CBD locations such as BKC, While the address remains a draw thanks to its inherent prestige, this factor is a challenge for both the corporates and large banks that traditionally favored Nariman Point,” he says.

However, Nair feels that in spite of all this, Nariman Point is unlikely to host larger MNC occupiers who have already moved out to Secondary Business locations. “It is unlikely that the next 2 – 3 years will witness any large scale relocations from Nariman Point, what we expect is that companies which are currently based out of Nariman Point will expand within the same building or the same location,” he says.

“Companies which are at Cuffe Parade and Churchgate on lease, may aspire to move to Nariman Point which is more upmarket and the rental differential will be at its lowest in the next few years,” explains Nair.

Jain believes that in today's changed environment, companies are concerned about their employees' comfort, safety and contentment at their workplaces. “They are also concerned about cash-flows, and are no longer very willing to pay exorbitant rentals for yesterday's prestige address. Most of the office buildings in Nariman Point are in serious need of refurbishment and up-gradation. Only when this happens will it be able to match swords with the newer business districts again,” he adds.

Many experts believe that with rentals and capital values gradually going down, societies slowly will come together to discuss redevelopment. “The new buildings with modern amenities and bigger space may seem like the best bait for the area to compete with newer areas,” they say.

But there are optimists and area loyalists at the other end of the spectrum like Irfan Khan who is running a brokerage business in the area for the last 20 years. According to him the deserters were never the original occupants of the CBD.

“The original firms and businesses are still staying put at their original addresses,” says Khan. “In fact I get lot of inquiries from the newer firms for the rental space and there is no vacant space available. The demand is very high and supply is less,” states Khan emphasizing that it is still profitable to do business out of Nariman Point than moving to newer location.

“The ones who followed the foreigners are finding it difficult to shell out costly rents at places like Lower Parel and BKC they all want to come back,” he says.

“Plus though the high level and mid level staff find it easier to commute to BKC or Lower Parel in their cars … the lower rung employees have to struggle with peak hour rush to get in and get out at Bandra and Lower Parel as the stations not being the starting points like Churchgate or CST ..People find it difficult to board the train,” he argues.

What Local Authorities Need To Do...

  • There is an ongoing property tax dispute between many Nariman Point societies and the local authorities, if the authorities abandon this issue it will give buyers some relief
  • Local Authorities could use the Property Tax collected to refurbish the buildings complete with modern facades and better amenities
  • Road widening is a major problem which can only be tackled by the authorities
  • Pushing the Coastal Road proposition would also be a positive
  • The New DP does not specify a revised FSI for Nariman Point some clarity on this would help redevelopment of the area.

The History
According to records, Nariman Point was not Mumbai's first business district. The earliest business center was Ballard Estate, which was the city's commercial hub in the late 18th and early 19th century. From there the natural transition happened to the Fort area which was adjacent to the estate, which remained the as the hub of activities till mid -19th century. As the growing city demanded more space, Nariman Point was developed in the early 1970s to accommodate small firms and establishments. The Big business houses of that era had own buildings like Bombay House or Mafatlal center.

In the 90s,Indian government opened up economy in 1991 and the multinationals entered the scenario with their big money and big plans, first opening offices at Nariman Point. After the initial phase of uncertainty they wanted to expand operations and wanted bigger space- plus there were perils of dealing with greedy and painful landlords due to Pagdi system- which was not available. The corporates found their answer in the form of a planned business center in the marshlands of the Mahim Creek called Bandra Kurla Complex. After the amendment of Rent Control Act by the government -which raised the property tax many fold which was passed on by the landlords to tenants- corporates fled to the greener pastures of BKC with its new swanky spacious buildings and superior infrastructure.

Corresponding years saw emergence of not one but several business and commercial hubs -The Malad Andheri belt in the western suburbs, Lower Parel- Prabhadevi-Worli on the central side and the Thane-Navi Mumbai-Belapur area in the eastern suburbs side.

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