New launches at ‘real’ prices RATE BAIT

De­vel­op­ers want­ing some move­ment in a slow mar­ket are launch­ing pre­mium projects at un­be­liev­ably af­ford­able rates

HT Estates - - FRONT PAGE - Van­dana Ram­nani

Afew months ago, a lead­ing con­sul­tancy in its re­port had said that the un­cer­tainty over project de­liv­er­ies and the un­af­ford­abil­ity of ex­ist­ing sup­ply had led to de­pressed buyer sen­ti­ments in the NCR and bot­tom­ing out of sales ve­loc­ity. The mar­ket dy­nam­ics have been such that short-term spec­u­la­tors have been re­strained from making quick re­turns from real es­tate in­vest­ments. Long-term in­vestors have also been ex­er­cis­ing cau­tion be­cause of the muted price growth. The NCR, In­dia’s largest res­i­den­tial mar­ket, was also chal­lenged with the coun­try’s largest un­sold in­ven­tory of 189,768 units.

Three months later, as the mar­ket is look­ing to beat the blues dur­ing the fes­tive sea­son which has seen very few launches, a lead­ing de­vel­oper has de­cided to launch 100-odd units at un­be­liev­able prices of ₹ 2,500 per sq ft, just about re­cov­er­ing land costs.

This move is be­ing viewed by realty ex­perts as a bid to cre­ate a buzz in a slow mar­ket. With a not- very- spec­tac­u­lar year near­ing the last few months, are prom­i­nent de­vel­op­ers now out to prove to the more-than­ever cau­tious cus­tomers that they too can of­fer real prices? Will the strat­egy of launch­ing a few units at rock-bot­tom prices re­vive con­sumer con­fi­dence and lead to the much-needed trac­tion in the mar­ket?

By repric­ing at the bot­tom of the mar­ket, not only are de­vel­op­ers bring­ing at­ten­tion to their projects, they are also shak­ing up the mar­kets a lit­tle, at­tempt­ing to cre­ate move­ment, says Anckur Sri­vast­tava of GenReal Ad­vis­ers.

It is a price dis­cov­ery mech­a­nism and re­flects the state of health of any real es­tate mar­ket. At this price point liq­uid­ity is a given, some­thing that helps cre­ate move­ment in the mar­ket. Even­tu­ally prices will ad­just too. Ear­lier, in a fast mov­ing mar­ket, when mar­gins were high and enough buy­ers ex­isted, builders would dis­cover a higher price when­ever they would launch a new project. This time round, how­ever, the buyer is dis­cov­er­ing the real price at the bot­tom of the mar­ket. Once a real es­tate prod­uct is priced right in a slow mar­ket, liq­uid­ity is bound to re­turn, say ex­perts.

The mar­ket is fac­ing a cri­sis of con­fi­dence and this is the right step to­wards re­vival, they add. Navin M Ra­heja, CMD, Ra­heja Ra­heja Group has launched 114 low-rise apart­ments at a price of ₹ 2,500 per sq ft in Sohna. The ac­tual mar­ket price in the area is any­thing be­tween ₹ 5,000 per sq ft to ₹ 7,000 per sq ft. Vil­las in the project are be­ing sold at around ₹ 8,500 per sq ft A few weeks ago, Ya­muna Ex­press In­dus­trial De­vel­op­ment Author­ity launched 900 plots of 120 sq me­tre and 162 sq m, priced at ₹ 17.04 lakh and ₹ 23 lakh Chennai builder VGN De­vel­op­ers has an­nounced the launch of 1,300 apart­ments at just ₹ 7,000 per sq ft, when the pre­vail­ing rate in the area has been close to ₹ 9,500 per sq ft Group, whose com­pany has launched a scheme lim­ited to 114 low-rise apart­ments, says that of late expectations have been high in the real es­tate mar­ket of de­vel­op­ers cor­rect­ing prices. It’s also be­cause of this that many home­buy­ers have been sit­ting on the fence. “We have only brought down the price at the level of what it cost us and that has re­sulted in in­creased book­ings,” he claims.

“It has cer­tainly re­sulted in the nec­es­sary cash flow and move­ment in in­ven­tory. It has also helped us in sell­ing our in­ven­tory and our cus­tomers have got an op­por­tu­nity to buy some­thing at real prices,” he says.

While this scheme is lim­ited to 114 low-rise units, Ra­heja will be launch­ing a sim­i­lar scheme lim­ited to 200 or 300 units next time around in the same or a dif­fer­ent area. “We will be as­sess­ing the mar­ket be­fore de­cid­ing on the price which will be ac­cord­ing to mar­ket dy­nam­ics and ac­cept­abil­ity,” Ra­heja adds.

A few weeks ago, Ya­muna Ex­press In­dus­trial De­vel­op­ment Author­ity also launched a plot scheme, re­leas­ing an in­ven­tory spread across two acres at af­ford­able prices. At­tempt­ing to in­ject life in the re­ces­sion-hit mar­ket, it launched 900 plots of 120 sq me­tre and 162 sq m, priced at ₹ 17.04 lakh and ₹ 23 lakh, re­spec­tively, in the prime lo­ca­tion of Sec­tor 22D.

C h e n n a i b u i l d e r VG N D eve l o p e r s a l s o r e c e n t l y an­nounced the launch of 1,300 apart­ments for just ₹ 7,000 per sq ft in an area where rates usu­ally are close to ₹ 9,500 per sq ft. The pro­moter Pratish De­va­doss was quoted as say­ing that this dis­count was not only about making the best of the fes­ti­val sea­son but also about gen­er­at­ing the much-needed cash­flows. “So, we de­cided let us bring the prices down, in­crease the af­ford­abil­ity and get cash flows into the com­pany,” he re­port­edly said in an in­ter­view.

A Ban­ga­lore- based realty group tied up with a bank to of­fer buy­ers a 200 ba­sis point cut on a home loan for the group’s on­go­ing town­ship project. This helped in­crease the com­pany’s cash flows in a slow mov­ing mar­ket.

This is an in­tel­li­gent way of dis­cov­er­ing the right price in a slow mov­ing mar­ket, say real es­tate ex­perts. But the ques­tion here is whether all other de­vel­op­ers will fol­low suit in­stead of dy­ing a slow death. Dr Sa­man­tak Das, chief econ­o­mist and di­rec­tor-re­search and ad­vi­sory ser­vices, terms this is a “cop­ing strat­egy” by de­vel­op­ers who are in a tight spot as far as cash flows are con­cerned. This not only helps at­tract cus­tomers, but the mar­ket also gets kick­started in terms of cash flows.

Such schemes, how­ever, can only be launched by de­vel­op­ers who have large land banks, large in­ven­to­ries and have the where­withal to hold on for a longer pe­riod of time, add realty ex­perts.

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