Thursday, July 12, 2007

Some sense returning to the market

Economic times reports

AS BUYING interest slows down for residential properties due to high interest rates on home loans, property developers across India are said to be taking a fresh look at the Rs 20 lakh - Rs 40 lakh segment, which was left largely unattended over the past couple of years.
The developers are seeking to address the needs of this vast segment by bringing down the sizes of the residential apartments from a large 2,500 sqft-3,000 sqft high-end flats for a 3BHK, to a reasonable 1,400 sqft-1,650 sqft 2BHK flats and make them affordable for a larger customer base.
“The developers are coming back to the basics across the country, be it Gurgaon and Ghaziabad or Hyderabad and Bangalore,” said Mr Raminder Grover, president, Residential Services, Sandalwood High Street Residential Consultancy, a division of Jones Lang Lasalle Meghraj. While, several developers in Gurgaon are planning to launch a slew of projects after the new ‘Master Plan’ for the region is firmed up, Mr Grover said, those in other cities like Bangalore too are working on this front. Property developers in Ghaziabad’s Indrapuram are already offering a 2BHK flat for Rs 18 lakh - Rs 20 lakh, which was not the case earlier.
“While the high land prices prevent the developers to offer dwelling units at a lower price beyond an extent, they are resorting to reducing the size to make it suitable for a large segment, with as much amenities as possible that was earlier offered for larger high-end flats,” he said. And banks too tend to take it easy in the case of a Rs 20 lakh loan for a 2BHK apartment, he added.
Mr Grover prefers to call the reported fall in prices of residential apartments across several cities as “slowdown due to high interest rates” and not a “correction”. “It is not a correction, but a slowdown. And the residential segment is going through a phase of consolidation across the country, in every city in its own way,” he said.
According to Mr Grover, with residential segment accounting for almost 80% of the Indian real estate market, any slowdown in this segment attracts attention. But, none of the established residential developers have lowered the prices in the recent past.
However, what has been happening is the fact that investors, roughly comprising 20% - 30% of new home buyers for quick returns, are selling their holdings at the available prices. “Here too, as early movers, the investors continue to exit with profits. What varies is the extent of their profits across cities,” Mr Grover said.