Realtors refuse to buckle
The dip in demand has not compelled suburban Mumbai developers to lure buyers by slashing prices. They would rather wait for a recovery, discovers Jayashree Kini-Mendes
In January this year, an evaluation of the most expensive cities in the world by Global Property Guide threw up Mumbai at No 9. The economic crisis then had yet to touch India. Eleven months down the line and a global financial contagion to boot has not changed the situation. Mumbai continues to stick fast to its premium rates.
While this tendency has seen a chastening among realtors in south Mumbai resulting in a correction in prices of houses and office spaces, it is the suburban developers that have refused to buckle.
Vinod Nair, sales & marketing head at Khushalani developers, said: “When we buy land to construct and are given all the necessary sanctions, there are certain expectations. From the time of design to execution and completion, almost two years would have passed by. Moreover, the developer has certain expectations about the profits they are going to make.”
Khushalani has two developments in the city, a recently completed project at Kandivli and an under-construction at Juhu. Although the developer does not like to admit it, he does hint that there are fewer investors or buyers evincing interest in the new projects. However, he is adamant about one thing: He will not slash prices, offer discounts or announce any schemes.
Most developers we spoke to are convinced that the current market conditions cannot last in the new year. “It was a bloodbath out there. But there is plenty at stake. Investors cannot afford to block their money because they cannot sell or release their investments. In fact, some developers in the western suburbs are increasing prices of their new developments as if the slowdown has not happened,” said one developer on condition of anonymity.
Runwal Group, another suburban developer with developments in central Mumbai, continues to demand Rs40-45 lakh for a 2BHK apartment in Thane. The developer believes that once the dust settles, real estate investors will again re-emerge as an attractive investment destination.
“Cutting prices at this juncture would affect the money flow for other developments. There are certain commitments made to buyers and faltering on this would erode the trust they have placed in us. Moreover it is the real investor who will continue and buy at current prices, with the confidence that real estate investment cannot go wrong,” said a spokesperson at the company.
One developer, Sunil Mantri Realty, has come up with an innovative way to sell apartments. If market sources are to be believed, this developer has sold 50 flats in a week by incorporating a buyback offer in the sale agreement. The clause states that investors can sell back the flats to the developer at the current prices within three years if prices at that time are lower. Apparently, the scheme, which was open for a week, was designed to test the sentiments of buyers.
While developers of new properties may well be ironclad in their decisions, it is the determination of distress sellers to sell flats at current market rates that’s surprising. Prospective buyers, seeking to cash in on the economic turmoil and hoping to getting better deals, are caught unawares.
Even buildings as old as 25-30 years command prices equal to that of 5-10 years old. The reasoning: Perceived value of the flat. An analogy could be drawn to stock broking investment where net worth of the investor is determined by the current market price at escalating stock prices.
The sellers are willing to wait and only sell if they can accrue current market value for their apartment. Instead, some of them are willing to offer partly-furnished flats and maybe throw in the parking space also.