In a new avatar

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In a new avatar

Old wine, new bottle: The Elgin Flour Mills, once a distinctive red brick structure, is now Prestige Elgin. A look around Bangalore makes one realise that the city is bursting at the seams. Bangalore today is seeing an equal growth rate in terms of commercial as well as residential spaces. In such a scenario, real estate developers turn to more viable means of development. High rises answered demands to a certain extent. Urban redevelopment seems to be the next sensible course of action. Gagan Singh, CEO (Project Development Services), Jones Lang LaSalle Meghraj says, “Urban redevelopment is all about revitalising congested city interiors. Redevelopment gains prominence in a scenario where conventional development activity is still subdued by various economic and market dynamics. Most major Indian cities with established real estate markets have pockets that lend themselves suitably to redevelopment. These include Chennai, Hyderabad, Bangalore and Delhi, apart from established smaller towns and cities.”
Present day significance

Cities like Bangalore expand radially. This gives it ample scope to push city limits and uncover new potential areas of development. However, time and again, it is the central part of the city that constantly witnesses a demand. V Gopal, Senior Vice-President (Projects & Planning), Prestige Group says, “In the past few years, Bangalore has been growing at an unprecedented rate. The city has witnessed migration of people from other parts of the country which has resulted in its exponential growth.

With the city centre getting increasingly saturated, vacant land becomes a scarcity. Hence, it is only logical to redevelop existing urban property in order to create more space and better amenities within the heart of the city. Such developments can be planned in such a way, so as to counter problems such as traffic congestion while improving the aesthetics of the locality.”

Sharing a similar view, Maneesh Gupta, Associate Director (Consulting & Valuation), from Colliers International adds, “It is a continuous process in most big cities. To make use of increased FSI over the years, homes in CBD giving way to commercial or retail complexes. Large bungalows make way for modern apartment complexes, old palatial houses and bungalows take the shape of heritage hotels and more.

One of the most important reasons for the owners to re-develop their properties is to monetise the huge jump in valuations of the old properties over the years.
A few examples in Bangalore include UB City, Cash Pharmacy, Lido Theatre among others.

Is this business good economics?
Good business takes place when there is a significant amount of demand involved. So is there such specific demand for redeveloped urban property? Maneesh Gupta feels that majority of the redevelopment work in Bangalore is taking place in the CBD, which proves  that there is always a demand for real estate in prime areas. He adds, “This may also be evident from the fact that the central business district (CBD) invariably has lower vacancy rates than the secondary business district (SBD) and peripheral business district (PBD). There is a significant demand from real estate developers for redeveloping these properties primarily because getting large parcels of fresh land in CBD is extremely difficult and redevelopment seems to be the only way to develop more properties in such areas.”

Gagan Singh explains that the demand is significant and returns are substantial as well. She says, “Builders undertake to redevelop dilapidated buildings via strategic tie-ups at their own cost, and in the legal capacity of the constituent attorneys. There are various advantages, including the acquisition of additional flats, thanks to greater FSI, and reduced stamp duty. Most redevelopments feature additional floors due to greater FSI, and the builder retains a certain number of the added flats.” Singh adds further that since the value of a redeveloped building is much higher than the original, the builder makes a profit on the sale of these flats and also shares in the benefits of lower stamp duty than would be applicable in Green Field projects.

V Gopal avers, “If the existing development is old, unsafe or not in use, then it is viable to redevelop it into a more modern development. In case of a project, Prestige Elgin, which was a refit of the historical Elgin Flour Mills that had stood on the site for close to hundred years, the units were sold out before the construction began. This goes to show the demand for such projects.”

Gupta also adds that in terms of benefits, the percentage of Grade A buildings in a city or the CBD increases. Also, due to increase in FSI the total quantum of real estate available in the city increases. Space is created in congested areas for newer kinds of developments (for example malls / multiplexes), which were an unknown entity till about a decade back. The concept of urban redevelopment seems to have caught on in the scheme of city planning. Of course, the onus then falls on infrastructure. A better idea for the real estate developer is to also take on the task of improving surrounding infrastructure so as to make urban redevelopment a more feasible form of growth. 

 REDEVELOPMENT

* The Elgin Flour Mills, a distinctive red brick structure, had grown into a well-loved landmark on Hosur Road.

* As modernisation swept through the city in the 80s and 90s, it threatened Elgin Flour Mills, which had already downed shutters.

* When matters reached a point where this well-known heritage building itself was in danger of being brought down, Prestige stepped in.

* The idea was then conceived to take over the property and redevelop it into upper class dwellings, while  retaining the original building’s distinct character.

* As a result, even after the redevelopment, visually, nothing really changed, though it was transformed into Prestige Elgin. 

* Another example is Prestige Delta, which has been developed in the place of the historic Cash Pharmacy building on Residency Road.

* The pharmacy has given way to a commercial property, housing several corporate offices while accommodating the heritage Cash Pharmacy within its premises.

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