Monday, February 23, 2009

DLF slashes apartment prices on OMR

Times Of India reports

CHENNAI: Shaking up the city's realty market, DLF on Monday announced a hefty price cut, ranging from Rs 3.6 lakh to Rs 12.6 lakh, for its residential project Gardencity - on the Old Mahabalipuram Road (OMR).

It would benefit existing as well as new customers, said K K Raman, executive vice president, DLF Chennai. The builder has introduced four price slabs, three for old customers and one for new entrants. Those who booked apartments during the soft-launch of the project, at Rs 2,800 per sq ft, would get a discount of Rs 300 per sq ft. The new price for those who booked at Rs 3,000 per sq ft last year is Rs 2,550 per sq ft. The maximum discount of 18.75 per cent Rs 600 per sq ft has been given to those who booked at Rs 3,200 per sq ft between August 2008 and February 2009. The price for new customers is Rs 2,650 per sq ft; the price will hold till May 31, 2009.

While the minimum savings on the smallest apartment 1,200 sq ft at Rs 300 per sq ft works out to Rs 3.6 lakh, the maximum benefit for the largest apartment 2,100 sq ft at Rs 600 per sq ft is Rs 12.6 lakh. This is also the highest price cut announced for an ongoing project by any promoter in Chennai after the economic crisis set in. Significantly, the promoter has also decided not to collect any interest for delayed payment from existing customers.

Speaking about reasons for taking such a drastic step, Raman said: "With unprecedented events in the world economy affecting the real estate sector here, bringing changes in input cost and interest rates, DLF went back to the drawing board and created further efficiencies. These benefits are being passed on to consumers."

DLF entered Chennai's residential sector with a bang in January 2008 by announcing the biggest project of 3,493 apartments spread over 53.5 acres in Semmanchery, 2 km off OMR. Its soft-launch made headlines with close to 2,200 people booking flats in less than two weeks. All major empanelled realty consultants were in the race for clocking the maximum number of bookings for the project. Three months later, when the formal launch happened, several hundred customers opted out, perhaps anticipating the market downturn in the months to follow. The DLF sales team took several months to make up for those cancellations. Currently, the project has about 1,800 bookings in the first two phases.

Ramesh Nair, MD, Jones Lang LaSalle, an international realty consultant, said: "DLF's price revision could drive up demand for the project as it becomes more affordable for home buyers. It will also lead to most developers reducing their unit sizes and building specifications apart from reconsidering their pricing strategy."

At least half-a-dozen residential projects on OMR, in which private equity funds, mostly foreign, have been parked on a pre-agreed condition that sales will be effected at a minimum price of Rs 3,200 per sq ft, will be affected by the DLF move. Also, customers who had booked apartments in other ongoing projects on OMR at higher prices could apply pressure on their builders. In short, a price correction for properties on the much-hyped OMR is perhaps underway.

17 comments:

harry said...

i still think the price is freaking expensive and people will not go for it.. OMR has stopped developing and when will the project get over.. it seems more like a ponzi scheme..taking your money to service their debt and not doing any construction at all.. maybe 1800-2000 could be a tipping point. 2500 is too high for OMR..not worth it.. its actually 20 kms from madhya kailash..

Anonymous said...

Given the drastic change in US conditions, and how it will affect outsourcing and globalization in general, the whole OMR concept will probably fall apart. Even at 1000Rs who would want to live in an area that has no infrastructure? I am sure chennai folks will soon realize this. This is just the beginning. Is it not!?

Anonymous said...

Mumbai: Realtors seem to be getting deeper into trouble. Affordable housing, which many had clambered on to in a desperate bid to keep toplines intact, is proving a less than stable plank, much less a buoy.

DLF, India's top developer, could sell only 77 units last quarter, compared with 400 units in the two quarters preceding the last.

Indeed, going by analysts, of all the verticals, affordable housing performed the worst for the company, forcing it to bring down project prices in various locations.

DLF has begun to re-launch projects, which had seen lesser sales or were halfway through, at lower prices. It has re-priced products with a minimum 25% discount and re-designed homes into smaller sizes. The company is also entering the low-income segment.

Margins are understandably under pressure -- affordable housing doesn't fetch the margins other projects do and premium projects have all been stalled. Earlier, DLF used to make margins of over 60% in the premium segment. This has fallen to around 25% in the affordable projects.

In fact, even in the affordable segment, DLF had managed to sell properties in the range of Rs 40-60 lakh. Today, prices are down to levels of Rs 25 lakh to Rs 38 lakh.
In fact, the developer has to sell three homes in the lower segment to equal the margin it could get on sale of a single premium project, which is not happening. It just cannot afford to have 15% of the project unsold, because here it is all about volume sales.

A DLF spokesperson said the company is going to launch a series of projects in the affordable housing segment and would try to sell off the entire project in the pre-sales period itself.

But analysts do not expect any recovery in project sales before the second half of next fiscal, the developer's best efforts notwithstanding.

Analysts Sameer Baisiwala and Arunabh Chaudhuri of Morgan Stanley wrote in a report released on February 19, "Our channel checks suggest customer sentiment remains weak and transaction volumes are low."

Even Parsvnath Developers, another player from Delhi, was unable to generate sales in the affordable segment last quarter. The company, which has the highest area under construction, reported an 83.5% fall in the cost of construction, suggesting a near stoppage of project execution.

An analyst with a domestic brokerage said Parsvnath has not been to sell anything and that if it continues to stick to projects without lowering prices, "nobody can help them."

While no developer has a ready-to-move-in property as of now, affordable housing is losing sheen for developers. Going by analysts, even as the inventory is yet to hit the market, buyers who had booked homes are cancelling payments because of a reduction in prices. Bookings, which happened in the last six months, are facing the maximum cancellations, increasing receivables of developers. Most developers have not yet started construction on projects, either due to changing product dynamics or regulatory issues.

Rohtas Goel, promoter of Omaxe Ltd, also Delhi-based, told DNA Money earlier this week that the parent company is launching 10,000 homes in the affordable segment.

Earlier, Omaxe had planned to focus on mid and low income segments through its subsidiary, NAFHIL. Sources say Omaxe has shelved its project in the higher segment under the brand name Panache and decided to concentrate on the mid-segment
Meanwhile, Bangalore-based Purvankara Projects is awaiting government clearances for launching its own affordable housing project. This could spell direct competition for DLF in the segment.

K said...

So far DLF is the only developer who admitted the RE downturn and reducing the price. All other RE companies are still trying to hold on to their inventory hoping the market will recover soon.

Anonymous said...

if the IT sector is not reviving its not worth more than 750 per sqft

Anonymous said...

The party is long over now. It is hangover time. DLF maybe getting back to senses. Others are still drinking kool aid.

Anonymous said...

More people in India are in denial. Exactly how it was in U.S in 2006, before the housing market came unglued.

Anonymous said...

Pune developers to pay EMI of laid-off clients

BS Reporter in Mumbai/ Pune | February 24, 2009 12:20 IST

The shrinking sales of residential apartments have forced real estate developers in Pune to even pay the monthly home loan installments of their customers who have lost jobs due to the economic slowdown.

A large number of real estate developers have decided to pay up to three equal monthly installments (EMIs) of their clients who have received a pink slip.

The builders have also convinced a number of banks to delay the repayment of the capital amount of the loan for a specific period.

A large number of professionals working in automobile and information technology sectors have been laid-off over last three to four months in Pune. This has made it difficult for them to pay the EMIs of home loans they have taken to buy residential apartments.

Anonymous said...

Why govt. is so eager to boost housing sector? How many people are on DLF OR Unitech’s pay roll?

http://www.livemint.com/2009/02/24224001/
Govt-to-take-more-steps-to-boo.html?h=B

It is less than 1000. But govt. keep telling that Lakhs of people have lost jobs due to housing slump. Yes, it does employ lot of unorganized labors & exploit them.
http://www.eldis.org/fulltext/raosocial.pdf

What kind of benefits govt. bargained with RE while proposing the stimulus? Are they going to hire these unorganized labors on pay roll?

Vulture.

Anonymous said...

Have you asked Mr Chidambaram, how come the deficits became so large & fiscal condition so weakened? 6 months before he advocated everybody about strength
of Indian economy. Recently some advertorial wrote about the effect of stimulus package & economic rebound. But market didn’t like the false advice.
“With high government debt burden and deficits, its weak fiscal profile has been the single largest negative factor for the sovereign ratings on India,” S&P said in a statement.”
“The outlook revision comes after a gap of two years and could result in lower inflows from foreign institutional investors and lead to some weakness in the rupee.”
http://www.business-standard.com/india/news/
sp-cuts-india-outlook-to-negative/01/58/350084/

As foreign funds are not available, now RE is desperately looking for buyers. Agreed with the help of politicians they have extended some debt, but how long?

So guys let it fall then only pick up, minimum 50% price cut is guarantee.

Vulture.

Anonymous said...

Chidambaram is a sold polished politician. Basically a chutiya serving interest of his own people. And not the people who elected him. India is full of a bunch of jokers.

Anonymous said...

Government Bails out Builders through SBI in India

http://fraudsofindia.blogspot.com/2009/02/government-bailsout-builders-in-india.html

Anonymous said...

Government Bails out Builders through SBI in India

More Frauds at

Frauds of India

Anonymous said...

No more tax sops for cos outsourcing jobs: Obama

http://businessstandard.com/india/news/no-more-tax-sops-for-cos-outsourcing-jobs-obama/19/10/55741/on

EU is also considering a similar measure. In the coming few months, people who have taken loan from banks, either for housing or car will start defaulting as they are likely to loose their jobs or will see the salary trimmed.

People like chudambaran, instead of cautioning the people to tighten their belts, are painting a picture of economic recovery and boom

Kannan said...

Chidambaram's is not going to be elected in the coming elections.His son is useless unemployed.He is trying to make as much money as possible during this. Media was always going ga ga over Chidu but his earlier terms were all not more than 2 years.This is his full term as fianance minister and he screwed up.Did nothing other pocketing money from all sectors.

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