New Delhi/Bangalore: India’s next crop of construction companies are trying to gain market traction by doing more to gain the trust of homebuyers weary of builders eager to get their money but slower to deliver on promises.
Builders such as The 3c Company and Ireo, a global investment fund dedicated to the Indian real estate sector, are launching projects where construction has already started and the sample flat is ready.
Keeping the faith: An artist’s impression of the LGCL Ashlar, a premium villa project in Bangalore. The company is keeping payments from buyers in a separate construction escrow account for the project.
This is contrary to the usual practice of launching projects before construction has begun.
“It was a very conscious call to start construction and have the sample flats ready before we went live with the customer,” says Brijesh Banote, senior vice-president, sales and marketing, 3C, which is entering the residential space for the first time.
“We wanted to give confidence to the consumer that we are a developer who started construction and then went to the market,” he says.
At 3C’s Lotus Boulevard township project in Sector 100, Noida, the company built four sample flats before launching the project. “We were selling four variations of houses in the project, so we made four sample flats,” says Banote. “That went down very well in the market.”
K.L. Shahi, 45, bought a three-bedroom apartment in Lotus Boulevard after being favourably impressed by the sample flat. “When I looked at the flat, I saw that the quality of material used was top class and excavation was going on, which gives you an idea that the developer will complete the project on time,” he says.
Since Shahi was not aware of the 3C brand, the fact that the company had a sample flat, was priced competitively and was constantly taking feedback from customers impressed him. He’s now recommending the project to his colleagues.
The new breed of developers are trying to differentiate themselves from the incumbents who drew a lot of flak during the slowdown for launching projects without approvals and for delaying completion. Several projects across the country have been delayed by one-two years because of a lack of funds and delays in obtaining approvals.
“In the past one-and-a-half years, people have bought projects where construction is not taking off,” says Banote. “When a project is 100% clear from the government, it gives a lot of confidence to people.”
Bangalore-based firm Lalith Gangadhar Constructions Ltd (LGCL) is keeping payments from buyers in a separate construction escrow account for its LGCL-Ashlar project, a premium villa project that was launched in 2008. The idea is to let buyers know that their payments are going to be used exclusively for that purpose.
“The escrow account provides safety and increases transparency for our customers in a market where real estate projects are stuck because sales proceeds received from customers have been diverted for non-construction purposes,” said Girish Puravankara, managing director of LGCL Developers.
Ireo, which plans to launch residential projects in New Delhi suburbs, is also following the practice of announcing projects only after all the approvals are in place and construction has started.
In township projects, the fund develops the basic infrastructure that’s required before launching it.
“We certainly don’t go to market till we have our sanctions in place,” says Madhukar Tulsi, president, Ireo. “We also wanted to have something to show on the ground as people now want some level of comfort that funds will be used for a specific project.” 3C is also aiming at delivering the first phase of the group housing project within 21 months from 1 September, compared with the 36 months that it usually takes, says Banote.
An analyst who tracks the sector in Bangalore, pointed out that developers may be using these as temporary incentives to regain customer confidence and push sales. “Builders today can’t take customers for granted and these are good means to be different from the rest of the tribe,” said the analyst, who didn’t want to be identified.
Some developers are also going the extra mile to bring buyers to the site. Century Real Estate Holdings Pvt. Ltd, a Bangalore-based developer has built a mock-up of a villa in Bangalore at a location that’s close to town and therefore easier for buyers to visit. The developer, who is constructing Rs2 crore villas at Yelahanka, has built a sample villa near Hebbal flyover, some 20km nearer to the city centre, with the same specifications.
“There were 170 enquiries in just six days and over 45 people walked in to see the sample villa,” said Alexander Moore, managing director, LJ Hooker India, a property consultancy firm. Century has also constructed a sample flat for its new affordable housing project even before the launch to market the homes among prospective buyers.