About Arkade Developers Limited

ARKADE DEVELOPERS is a real estate development Company concentrating on the development of premium aspirational lifestyle residential premises in Mumbai, Maharashtra, India’s commercial capital. Their business can broadly be classified into two categories: (i) development / construction of residential premises on land acquired by the Company (New Projects) and (ii) redevelopment of existing premises (Redevelopment Projects). As on June 30, 2024, they have developed 2.20 million square feet of residential property (including through partnership entities in which they hold the majority stake). They are engaged in the development of new projects and redevelopment of existing premises, and between 2017 and Q1 2024, they have launched 1,220 residential units and sold 1,045 residential units in different markets in MMR, Maharashtra. In particular, they have established a successful track record of completing their projects on time, and from CY 2003 to March 2024, they have successfully completed redevelopment of 10 projects in the western suburbs of Mumbai and 1 project in south-central Mumbai (through a partnership firm in which we hold the majority stake) with a combined constructed area of 1,000,000 square feet (approx.).

In the last 2 decades they have completed 28 projects (including 11 projects on a stand-alone basis (including 2 projects executed through partnership firms in which they hold the majority stake), 8 projects executed by their Promoter through his proprietorship, M/s Arkade Creations, and 9 projects through joint development arrangements with other third parties) aggregating more than 4.5 million square feet of development and have catered to more than approximately 4,000 customers. Their projects have, generally, been financed primarily through a mix of promoter equity and internal accruals. As on March 31, 2024, their net debt to equity ratio was 0.14.

Upcoming Projects
As of June 30, 2024, our Upcoming Projects comprise 6 projects in MMR, Maharashtra i.e., 1 New Project, viz., Arkade Rare located in Bhandup, i.e. Copper Rollers Private Limited, and 5 Redevelopment Projects i.e., 1 project Arkade Vistas and Arkade Views located in Goregaon East, 2 projects viz., Municipal Employees Arunachal Co-operative Housing Society and Maheshwar Niwas Co-operative Housing Society located in Santacruz West, 1 project viz., Laxmi Ramana Co-operative Housing Society located in Goregaon West and 1 project Nutan Ayojan Nagar Co-operative Housing Society located in Malad West, respectively.

Housing Scenario in India
The housing demand in India has always been high as homeownership is an emotional decision and this asset assures safety and financial stability along with a social standing. The rapid urbanisation the country has undergone during the past few decades has also risen the housing demand. 

The housing demand has also transitioned, predominantly in the urban landscape, from investors and speculators to end users. The reforms in the last decade, such as RERA, GST, IBC, and Demonetisation have been instrumental in altering the growth course of the housing market across the country.

Post the reforms, the supply-demand trend across the major markets has altered significantly. Supply exceeding sales, which was a more pronounced phenomenon in the pre-reforms regime led to high unsold inventory. This has changed to sales leading the supply in the past few years, which indicates a healthy market condition and is mostly driven by end users. 

Earlier, to contain the cost, the developers were resorting to reducing the unit sizes. The pandemic challenged this and now we see bigger and more functional homes are emerging as the need. Buyers today are more discerning and are looking for homes that come with rich and diverse amenities and features for a complete living and well-being. 

These trends are not only limited to tier I or the larger metropolitan centres but have spread to tier II & III cities as well. The rising income levels and increased aspirations for comfortable living in a healthy and self-sustained environment are gradually gaining momentum. 

Buyers today are also seen to be patronising environment-friendly green developments. They are no longer hesitant to pay a premium for sustainable initiatives and features that can reduce the carbon footprint and reversing the ecological damage inflicted on the environment. 

The residential real estate market is also witnessing the entry of large, listed, and established corporate houses. In a post reforms regime, the housing segment is now regaining the confidence of the buyers, investors, and stakeholders. It is now more transparent and accountable than before with most of the players exhibiting strong corporate governance. The rise in the market share of the large and listed players from 17% in 2016-17 to over one-third currently depicts the same.

The government has also taken up initiatives through the PMAY and is committed to providing housing for all. As of June 2024, Rapid progress has been made by the government with nearly 120 lakh houses being sanctioned and over 83.67 lakh houses completed under PMAY - U. Recently, the Cabinet resolved to support 3 crore more rural and urban households with the construction of dwellings, following the successful approval of 4.21 crore houses since the program's inception. 

The mass migration of labourers during the pandemic and the government’s resolve to ensure a constant supply of workers at all the development sites, the Affordable Rental Housing Complexes have also been announced under the PMAY. This is aimed to provide ease of living to urban migrants, Industrial workers in the non formal urban economy to get access to dignified affordable rental housing close to their workplace. 

The smart cities mission is also a major step to provide services and improved living standards to the residents. The focus is to provide data-centric solutions to improve municipal services and related infrastructure such as the development of a multi-modal transport hub, multi-level car parking, ridesharing, and renting among others. As part of the mission, 1,104 smart mobility projects worth INR 22,785 crore have been completed till FY23 while 526 projects are at advanced stages of development. Similarly, 984 public spaces have been developed in cities for INR 5,861 crore. 

The housing sector currently is on a strong foundation and the market is being run by large and listed players who are capable of creating new benchmarks. The launch pipeline appears to be healthy and the anticipated price appreciation in the coming years will continue to motivate the developers. As the end-users are driving demand and the supply has also rationalised, the market conditions are most conducive for all stakeholders.

Indian Residential Market
Indian Residential Real Estate Demand-Supply Dynamics – CY 2017 to Q1 2024

The Indian real estate sector faced challenges of adapting to various reforms and changes brought about by demonetization, RERA, GST & IBC. These measures initially posed difficulties for the sector in aligning with the new regulations. However, they ultimately proved beneficial by strengthening the industry and promoting transparency, accountability, and financial discipline over the past few years. The structural changes introduced by RERA and GST played a crucial role in enhancing the maturity and credibility of the sector and gaining trust of various stakeholders. Despite the hurdles, the real estate sector had been on a growth trajectory, showing promising signs of emerging stronger than before. Unfortunately, the COVID-19 pandemic disrupted this growth momentum, stalling progress temporarily. Nevertheless, the sector demonstrated resilience and managed to rebound in 2022 and the top cities surpassed the previous peak levels seen in 2014. This bounce back indicates the industry's ability to recover and adapt, showcasing its potential for future growth and stability.

The number of new launches has witnessed a remarkable surge over the past few years, despite facing various headwinds, reflecting robust growth in the industry. In 2020, due to COVID-19 pandemic, only 127,959 new units were added across the top seven cities of India. However, in 2021, the new launches increased by an impressive 185% to reach 236,693 units. This surge brought the number of launches in line with the records of 2019, indicating a recovery and an upward trajectory for the sector. The positive trend continued into 2023 as well, with a substantial improvement as the total number of new launches reached an impressive 4,45,770 units and witnessed record-breaking housing sales of approximately 4,76,520 units. These statistics depict a thriving market characterized by a significant increase in new launches, showcasing the sector’s vitality and potential for future growth.

Pan India – Unsold Inventory Trends – 2017 to Q1 2024 

By the end of Q1 2024, the unsold inventory at the Pan India level stood at approximately 5 lakh 80 thousand units, reflecting a 20% decrease compared to the unsold inventory as of 2017.

Top Seven Cities – Supply, Absorption and Unsold Inventory Trends – 2017 to Q1 2024

Top 7 Cities – Supply Trends – 2017 to Q1 2024 

Between 2017 and Q1 2024, MMR has contributed the highest share in new residential supply compared to the remaining top 6 cities, with a range between 24% and 37%. The average residential supply during this period in MMR is 32%.

Top 7 Cities – Absorption Trends – 2017 to Q1 2024

 During the period from 2017 to Q1 2024, MMR achieved the highest annual sales share of residential units across the top seven cities of India, ranging from 27% to 33%. On average, the sales in MMR accounted for 31% of the total residential unit absorption during this time frame. 

Below is the graph showcasing the year-on-year absorption trends (in units) of top 7 Indian cities from 2017 to Q1 2024.

As of Q1 2024, MMR accounts for 33% of the unsold inventory among the top 7 cities in India. Over the period since 2017, MMR has experienced an 15% reduction in unsold residential units. 
Below is the graph showcasing the year-on-year unsold inventory trends (in units) of top 7 Indian cities from 2017 to Q1 2024.

MUMBAI RESIDENTIAL REAL ESTATE

Eastern Suburbs :
Mumbai's eastern suburbs have experienced substantial expansion and development over a long period of time. The busy business and residential complexes of the region which include prominent localities such as Ghatkopar, Mulund, Chembur, Powai and Vikhroli have replaced the once-old residential and industrial regions. These neighborhoods were predominately known for their green spaces & open lands. However, Mumbai's increasing urbanisation and population growth increased housing demand, which prompted the development of new residential complexes in the eastern suburbs. The development of the Eastern Express Highway in the recent years and the existing Mumbai Suburban Railway, as well as other forms of public transit, played a significant role in connecting the eastern suburbs to the rest of the city and improving their accessibility.

The eastern suburbs have excellent transport connections to the rest of Mumbai. The Central Line of the Mumbai Suburban Railway offers access to numerous locations within the city. A strong presence of local transport options also makes it easy to commute both within and beyond the suburbs.

Most of the key office submarkets and residential catchments are easily accessible by road and rail (Central Railways and Harbour Line). The Eastern Express Highway (EEH) and Lal Bahadur Shastri Marg (LBS Marg) are the two parallelly aligned arterial roads that connect the eastern suburbs to the island city. The recently operational Eastern Freeway (P D’Mello Road to Chembur) and the Eastern Express Highway have emerged as the most crucial elements of the eastern suburbs as they link the crucial commercial micromarkets of BKC, Lower Parel, Nariman Point, Churchgate, Kurla, and Wadala to the eastern suburbs. Thane and Navi Mumbai's two significant peripheral residential and commercial micromarkets are well connected by the Eastern Express Highway and Airoli-Mulund Road respectively, while Jogeshwari Vikhroli Link Road and Metro Line 1 have improved connectivity with the Western Suburbs.

The East Suburbs' connectivity to the rest of the city is expected to change dramatically as a result of the large-scale infrastructure project that is being proposed. Facilitating access to Navi Mumbai's commercial hubs, the upcoming Navi Mumbai International Airport is poised to be a transformative project which is designed to alleviate congestion. Thereby, lowering passenger volume at Chatrapati Shivaji Maharaj International Airport. This is likely to increase the demand for dwellings in the adjacent suburbs and increase property values. Additionally, the 12-km Goregaon Mulund Link Road (GMLR) is planned to ease traffic on the JVLR and Western Express Highway and reduce the travel time between the Western and Eastern suburbs.

Western Suburbs :
Mumbai's Western Suburbs, also known as the Western Suburban District, is a significant part of the metropolitan city of Mumbai, India. The Western Suburbs stretch from Bandra to Dahisar and comprise several neighbourhoods, each with its own unique characteristics and offerings. 

Majority of them are vibrant and trendy neighbourhood known for its mix of upscale residential areas, commercial districts, and a lively nightlife. It is home to a large expatriate population and has numerous shopping destinations, restaurants, cafes, and pubs. 

The Western Suburbs of Mumbai are well-connected to other parts of the city through an extensive network of local trains, buses, and major roadways. The area offers a blend of residential, commercial, and recreational options, making it a popular choice for residents and visitors alike.

The Western Suburbs are well connected through roads and railways to most of the prime office submarkets and residential catchment areas. The three arterial roads – S.V. Road, Link Road and Western Express Highway have a parallel alignment and connect the western suburbs to the island city. Western Express highway is the most important feature of western suburbs as it connects both the domestic and international airport terminals to other micro markets of the city. The commercial areas of Lower Parel and Bandra Kurla Complex are also well connected, while Jogeshwari Vikhroli Link Road and Metro Line 1 have increased connectivity. It is now considerably easier to travel to and from the western suburbs with the addition of lines 2A and 7. There will be 11 additional lines in the city, totaling more than 300 km, that will connect the Western Suburbs to the rest of the city even more effectively.

The proposed large-scale infrastructure projects are likely to significantly alter the Western Suburbs' potential and connectivity to the rest of the city. The ambitious 22-kilometer coastal route will link Marine Lines to Kandivali and reduce the travel time from two to three hours to under an hour. This is expected to help decongest the already overburdened Link Road, SV road and Western Express Highway. Further, it is likely to create easy access to the commercial hubs of South Mumbai. Most importantly, it will decongest the suburban railways. This may lead to an uptick in the housing demand in the nearby suburbs resulting in appreciation of property prices. 

The Goregaon Mulund Link Road (GMLR), the 12-km road is expected to significantly reduce travel time between the Western and Eastern areas and relieve congestion on the JVLR and Western Express Highway.

Mulund (West) Micro-market :
The supply and absorption trends (in Units) in Mulund West micro-market from 2017 to Q1 2024. Mulund West has experienced a consistent and significant number of property launches from 2017 to Q1 2024. The majority of these launches, approximately 25%, occurred in 2017. However, the supply gradually decreased in the year 2020 due to the impact of the COVID-19 pandemic. Nevertheless, in 2022, Mulund West witnessed the second-highest number of property launches in the market, accounting for 20% of the total supply over during this period. 

In terms of absorption, Mulund West has shown healthy trends since 2017, with the exception of the year 2020, which was heavily affected by the pandemic. Despite this setback, the absorption level did not decrease significantly and quickly recovered, thanks to the reduction in stamp duty implemented by the Government of Maharashtra. This reduction played a crucial role in boosting sales in the region.

The pricing trends of Mulund West market from 2017 to Q1 2024. Currently the average capital value in Mulund West is INR 25,261 per Sqft on carpet. There has been a 25% price appreciation witnessed in Mulund West during the last seven years. From 2017 till 2019 only 4% prices escalated, the chart clearly illustrates a small dip in pricing due to the COVID-19 pandemic and a consistent increase in capital values from the year 2020 onwards, with a sharp spike in the year 2022 followed by gradual but steady climb in 2023.

TRENDS IN MUMBAI RESIDENTIAL REAL ESTATE (MMR LEVEL)
Mumbai isthe commercial and financial capital of India and houses the two stock exchanges which account for most of the securities traded in the country. With the busiest single-runway airport in India and two large seaports, Mumbai accounts for over half of India’s foreign trade, generates 6% of India’s GDP and one-third of the country’s tax revenues. Home to a flourishing media and film industry, the city also serves as the entertainment capital of the country. Its economic base is well diversified with a large presence of Banking and Financial Services Industry (BFSI), engineering, services, and IT/ITeS sectors, and logistic companies.

Mumbai is one of the biggest and most expensive real estate markets in India. It has various micro-markets along with Mumbai City, suburbs, extended suburbs and neighbouring areas such as Thane and Navi Mumbai. With the recent infrastructure projects completing such as Monorail and Metro (Line 1), Mumbai witnessed significant physical infrastructure improvements. Upcoming infrastructure projects (coastal roads, metros, etc.) in the medium term will improve connectivity further.

Mumbai boasts a wide range of industries and small to medium businesses, resulting in a diverse economic landscape. This vibrant city generates employment opportunities throughout the entire value chain, encompassing both front and back-office operations. It's worth noting that the introduction of additional office spaces in Mumbai's central and suburban areas has a consequential impact on specific residential pockets within the suburban regions, such as Ghodbunder Road, albeit with a delay of approximately 2-3 years. 

Furthermore, the peripheral regions of Mumbai, including Panvel, Bhiwandi, and Kalyan, have witnessed notable growth in logistics, e-commerce, and warehousing activities. The workforce employed in these areas has significantly contributed to the demand for mid-end and affordable housing options in Extended Eastern Suburbs, Thane, and Navi Mumbai.

MMR serves as a significant employment hub for both organized and unorganized industries in the country. The presence of grade-A office spaces in Mumbai directly influences the demand for housing in MMR, particularly in the organized sector. The employment opportunities generated by these organized industries significantly contribute to the housing demand in the region. Additionally, the employment generated from the unorganized sectors also impacts the housing demand, particularly in the suburban areas of MMR.

Mumbai is popular for itstraffic snarls. To decongest Mumbai’s roads, the Mumbai Metro Railway Corporation Limited (MMRCL) has already started the construction of Colaba-Bandra-SEEPZ corridor of Metro-3 project. This underground metro will prove to be a comfortable mode of transport. It will also lessen the crowd on the roads as well as in the local trains of Mumbai. This system of the metro will connect the major financial hubsin Mumbai such as Nariman Point, Fort, Worli, Lower Parel, BKC, Goregaon, etc. and provide connectivity to the CSIA, SEEPZ, and MIDC. Many new real estate projects in Mumbai are now coming up in the vicinity of these localities where the metro line will provide connectivity. The underground metro will reduce travel time considerably and also provide comfort and security while traveling. Upon completion of all metro lines, the core system will comprise 13 high-capacity metro railway lines.

Mumbai, a bustling megacity, faces a multitude of challenges in its real estate landscape. High property prices have become a significant barrier for middle-income and lower-income groups, making it increasingly difficult for them to afford housing within the city. The limited availability of land exacerbates this problem, leading to a prevalence of high-rise constructions and fierce competition for available plots. 

The city's ever-increasing population density has resulted in overcrowding and congestion in many areas, putting strain on people's quality of life and placing additional pressure on existing infrastructure. Speaking of infrastructure, Mumbai's development is often hampered by bottlenecks such as traffic congestion, limited public transport options, and a lack of essential amenities. 

Efforts to rehabilitate slums also face various challenges, including land acquisition, rehabilitation, and funding hurdles. Additionally, development initiatives can impact the environment, leading to pollution, resource strain, and the loss of green spaces. 

Legal disputes, such as land ownership conflicts and title concerns, further complicate real estate development and create uncertainties. Moreover, stark socioeconomic gaps are evident, with affluent neighborhoods existing alongside slum regions, making it difficult to address inclusion and provide suitable housing options for people of all income levels. 

Ensuring affordable housing alternatives for the city's workforce remains a pressing concern, considering the high land costs and the scarcity of inexpensive housing options. Furthermore, many older buildings in Mumbai require reconstruction or refurbishment, posing complex and expensive challenges. 

Lastly, land encroachments in certain areas add to the complexities, requiring actions to reclaim land for development. In sum, Mumbai's real estate market faces a host of obstacles that call for innovative solutions and thoughtful planning to cater to the needs of its diverse population.

“In MMR, a section of the supply of residential units originates from re-development projects. These projects may originate from housing societies redevelopment, cessed buildings redevelopments, MHADA layouts redevelopment or slum rehabilitation. In our estimation (note 1), the supply for the period of 2017 to 1Q24 is approximately 80142 units. The assumptions being: a) on relative terms proportion of redevelopment projects will be more in island city of Mumbai and in Mumbai suburbs, and lesser in other parts of MMR excluding the administrative jurisdiction of MCGM (Municipal Corporation of Greater Mumbai). This assumption is based on the observation that the island city of Mumbai has more older buildings than other parts of MMR and has fewer vacant land parcels to do development, b) Between western suburbs and eastern (central railway) suburbs proportion of redevelopment projects will be lower in eastern suburbs owing to availability of industrial lands getting converted into residential development, c) Rest of MMR has the least proportion owing to the age of buildings being relatively lower and more availability of vacant land.”

As per Municipal Corporation of Greater Mumbai (MCGM) data for year 2022-23, there are 387 buildings falling under C1 category of dangerous and dilapidated buildings, out of which 321 buildings are private buildings and the rest owned by MCGM. These buildings are potential market for redevelopment.” 

“In Mumbai Metropolitan Region, and in jurisdiction of Municipal Corporation of Greater Mumbai (MCGM) Mumbai in particular, there are several old buildings which need redevelopment. Many of these old buildings fall under “cessed buildings” as defined by MHADA. In island city of Mumbai alone (South Central Mumbai) as per MHADA data there are 19,642 cessed buildings. By definition, all of these buildings are constructed up to 30 Sept. 1969, which means as of June 2023, these buildings are more than 50 years old. Out of these, there are 16,502 buildings that are constructed up to 1 Sept 1940 meaning that they are more than 80 years old as of year 2023. These buildings need redevelopment and thus are potential market for real estate developers.

Between 2017 and 2019, the housing market in MMR witnessed a gradual growth in both supply and absorption of housing units, with absorption numbers surpassing the new residential supply. During this period, MMR’s housing supply and absorption recorded respective increases of 45% and 42%. 

However, the COVID-19 pandemic brought about an unprecedented decline in new residential supply and absorption. The MMR residential market faced significant challenges due to the pandemic, as well as subsequent disruptions due to the global economic headwinds, and rising interest rates.

Nevertheless, the MMR residential market showcased a remarkable recovery post-COVID, bouncing back from the impacts of the pandemic and other disruptions. Announcement of reduction in the stamp duty by the Maharashtra Government with effect from September-2020, boosted housing sales in the region during pandemic. The year 2023 turned out to be exceptional for MMR residential market since 2017, with the highest ever recorded housing supply of 1.57 lakh units and absorption of 1.53 lakh units. This resurgence in supply and absorption indicates a positive trend in the MMR housing market, reflecting its ability to overcome adversity and regain momentum after a challenging period. 

The housing supply and absorption in MMR experienced significant growth compared to 2017, with a remarkable increase of 194% in housing supply and an impressive 170% growth in absorption. 

ARKADE DEVELOPERS LIMITED COMPETITIVE STRENGTHS
1. Strategic location of projects in micro-markets of MMR, Maharashtra
2. We are a leading player and amongst top 10 developers in terms of supply in select micro-markets of, and an established developer in, MMR, Maharashtra
3. Experienced Promoter and strong and technically proficient management team
4. Strong in-house resources
5. Timely completion of projects

ARKADE DEVELOPERS LIMITED STRATEGIES
1. Continue to expand in the eastern region of MMR, Maharashtra
2. Moving up the value chain to premium / luxury residential premises
3. Continue to focus on our blended business model

ARKADE DEVELOPERS LIMITED RISK FACTORS & CONCERNS
1. They are subject to penalty clauses under the agreements entered into with their customers for any delay in the completion of their projects.
2. They rely on third party contractors whom they do not control to construct their projects.
3. Their entire business is concentrated within the MMR region.
4. Their redevelopment projects have long gestation periods and any delays and cost overruns could adversely affect their prospects, business and results of operations.
5. The operations are heavily dependent on the real estate industry.
6. Sales of their projects may be adversely affected by the inability of their prospective customers to obtain financing.
7. Their business and growth plan could be adversely affected by the incidence and rate of property taxes and stamp duties.