Developers make shift from luxe to mid-income homes

THE IMPOSITION OF 12% GOODS AND SERVICES TAX HAS LED TO LESS DEMAND FOR UNDERCONSTRUCTION LUXURY HOMES. IN THE NEW NORMS, BUYING COMPLETED HOMES IN FACT LETS BUYERS SAVE LARGE SUMS

Real-estate developers in Mumbai have shifted focus from selling ultra-luxury projects to either completing them or building mid-income or smaller homes. The change in strategy comes following subdued demand for luxury homes in the country’s financial hub, amid oversupply.

Launches of homes costing more than Rs 10 crore have declined in the past two years in the key areas of central and south Mumbai.

Launches in the uber-luxury segment fell 1% to 194 units in the first half of this year, according to property consultant JLL India. In comparison, total launches in the Mumbai realty market jumped 44% during the period. In the first half of 2016, as many as 280 luxury realty projects were launched in south Mumbai.

Mumbai-based Omkar Realtors and Developers, which has been building its largest luxury project so far, called 1973, for five years, has halted sales for the time being.

Located in the posh Worli neighbourhood of south Mumbai, the project comprises three towers with more than 300 apartments, of which nearly 100 are yet to be sold.

Omkar has closed bookings for 1973 for the last four or five months and will resume sales only by the end of this year as two other towers are near completion, said Babulal Varma, managing director.

“People are more enthusiastic about buying completed projects right now. We took a call to complete the project first and then open up for sales again when the market is better. We hope to fetch good rates then,” Varma said.

He added that Omkar will focus on building smaller apartments in the meanwhile.

The company is selling homes for around Rs 1 crore each at its newly launched 65-acre mixed-used development, Omkar International District (OID), in Andheri.

According to the real estate brokers and consultants, sales of large-sized luxury homes costing above Rs 10 crore have been extremely slow in the last three years as consumer demand has dipped.

While consumer demand has increasingly shifted to midsized and compact homes, the imposition of a 12% goods and services tax (GST) has also dampened luxury homebuyers’ enthusiasm. This has also made consumers prefer completed apartments, where Goods and Services Tax is not levied.

“Luxury homes are less of a priority at the moment. The focus for most real-estate builders right now is on building smaller homes and making it affordable for homebuyers.

“The sizes of houses have come down by as much as 25% to 30% in the last five years,” said Samantak Das, chief economist and head of research at realty consultancy JLL India.

Meanwhile, HBS Realtors has deferred plans to sell two of its ongoing sea-facing luxury property projects in south Mumbai. Two years ago, the company announced plans to build ultra-luxury projects around the areas of Marine Lines, Worli and Haji Ali, with each apartment set to cost above Rs 14.5 crore.

Sandeep Shah, managing director of HBS Realtors, said the company aims to raise funds to complete the projects instead of actively selling the apartments.

“People want to come in when they see much less risk of delivery especially for high-end homes. Moreover, buying completed homes ends up saving a lot of money in terms of taxation due to the current norms of GST,” Shah said.

Some builders blamed the oversupply of premium homes, particularly in prime locations like Worli and Lower Parel. The last four or five years have seen launches of several ultra-projects in those areas.

For instance, Worli currently houses some of the largest ultraluxury projects in Mumbai, such as Oberoi Realty’s 360 West, K Raheja Corp’s Vivarea and Artesia and Ahuja Constructions’ Ahuja Towers, among others.