Pricing risky but based on future market, say experts

Analysts have called the Lodha Group’s pricing of the Wadala project risky and exorbitant, but add that the developer seems to be optimistic.

Analysts have called the Lodha Group’s pricing of the Wadala project risky and exorbitant, but add that the developer seems to be optimistic.

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Lodha bagged the 25,000-square-metre plot for Rs 4,050 crore at the auction on Tuesday.

Pankaj Kapoor, chief executive officer, Liasas Foras, a real estate research firm said Lodha Builders may have made their own calculations before quoting the price. “In real estate, no property is bad per se and they [the builder] have heavily relied on the future market,” said Kapoor.

Sanjay Dutt, CEO (Business) of real estate consultancy firm Jones Lang LaSalle Meghraj, said: “The Lodhas with their significant presence in south Mumbai very well know the market.”

“It was an attractive bid and this can be gauged by the fact that many of the other bidders were close to us,” said Abhisheck Lodha, director, Lodha Group. “We feel it is the right price.”

Lodha believes the Monorail, Metro rail and the new freeway being built along the harbour will enhance the area’s profile. Kapoor said Lodha may first open bookings for investors, who are ready to make full payments, to recover land costs.

Rs 20,000 per sq ft.

Experts expect the builder to make a profit of at least Rs 3,000 crore from the project. The saleable area is 75 lakh sq ft with an expected sale price of

Rs 14,000 per sq ft. A residential project will generate revenue of Rs 10,500 crore.

Lodha will pay MMRDA Rs 5,723 crore including the bid price and interest towards land.

Sources said the developer may spend Rs 1,500 crore on construction at the rate of Rs 2,000 per sq ft.

Infrastructure development, marketing and other expenses are expected to be Rs 300 crore.

Even if Lodha spends Rs 7,523 crore, the approximate profit will be at least Rs 3,000 crore. The builder will only pay Rs 400 crore initially to acquire the land.

The rest will be paid in installments annually.