When the going gets tough…
Faced with dwindling sales and a precarious liquidity situation, developers across cities like Mumbai, Thane, Bangalore and New Delhi are resorting to survival measures that include slashing prices from 10-30%, tapping the NRI market and reconfiguring project specifications in keeping with market demands.
Mumbai-based developers like Kalpataru Constructions and Hiranandani Group are now offering hefty price cuts to woo buyers. While the former has reportedly reduced rates by close to 30% for its ongoing Siddhachal project, the latter is said to be offering a 10% discount on its twin Thane projects namely Hiranandani Estate and Hiranandani Meadows.
“Its the impact of the ongoing slowdown and an endeavour to boost demand,” says Mohan Deshmukh, managing director, Deshmukh Builders and former president of the MCHI. “There is a pent-up demand for about 10-12 lakh housing limits in the Mumbai region alone against a supply of about 50,000 units p.a. Given the demand slowdown this supply has dropped even further.”
While admitting that property prices especially within the Mumbai city limits were still beyond the reach of most buyers Deshmukh stresses that the prevalent property prices are a direct result of an acute land shortage.
Says he, “Let the government increase the supply of land, the prices will come down simultaneously. In the given scenario there is a limit to how much builders can afford to reduce prices. The government needs to takes measures like increasing supply of land, simplify the procedure for the multiple approvals, ensure easy availability of finance for builders and give a priority to infrastructure development.”
Down South at Bangalore, developers are re-positioning the price by removing extra amenities to bring down the project cost. “Though developers are offering discounts up to 10 per cent on the projects, some big companies, burdened with huge overheads, are struggling to bring down the rate,” says Ravi Narsimhan, a property consultant.
A few developers are also offering plots along with a housing unit, an unusual move in an industry that has become price-sensitive. Though figures on the number of unsold flats are hard to come by as no surveys have been taken up by the industry, sources estimate they run in tens of thousands.
“When the IT sector was bullish, the north-east, east and south-east parts of the city witnessed large-scale development — residential, office and retail — especially in K.R. Puram, Marathahalli and Sarjapur, as well as Bannerghatta Road, Kanakapura Road, J.P. Nagar and Jayanagar,” adds Narasimhan.
Apartment prices, particularly on the outskirts of Bangalore, have taken a major beating given the fact that discounts, freebies and even a special interest rates for housing loans are not bringing in customers.
Delhi’s real estate market scenario has also taken a severe beating with close to 30-40% premium properties in the price range of Rs50 lakhs, launched over the last six months, finding no buyers. According to industry experts, developers are now mulling over various proposals that include asking the government to buy unsold flats at market prices to venturing into joint ventures with other players.
“We are actively considering the possibility of initiating partnerships and joint ventures with reputed realty players from other states,” reveals a leading developer on conditions of anonymity. “Besides access to our markets in the north we will also offer them land as equity.”
With local buyers drying up, developers are also increasingly looking at the NRI population scattered across Hong Kong, UK, US and the Gulf region as a potential source of revenue. Delhi-based Omaxe Group is one such builder that is planning on leveraging the NRI market by offering investment deals across its residential and commercial projects in cities like Delhi, Chennai, Hyderabad and Bangalore.
“NRIs and PIOs have traditionally been a reliable market for realtors since they are always looking at investing in India,” states Rahul Awasthi, a realty analyst. “Besides with the downturn in the market and property prices going south they are now in a position to get a better deal for their hard earned money.”