Bangalore/New Delhi: When many of the homes under construction now —during the financial downturn—are ready in two years, they would belong to a new breed of urban living spaces. Smaller and minimalist, with little landscaping, open car parks, and pre-cast walls and ceramic floors replacing marble and vitrified tiles.
Realty firms such as DLF Ltd, Unitech Ltd, Lodha Developers Pvt. Ltd and Puravankara Projects Ltd are collaborating with architects to optimize resources and reduce costs. Such penny pinching has become common in the past few months as the downturn forced developers to cut property rates and launch cheaper homes to boost demand.
Cutting costs: An artist’s impression of Bangalore-based Ozonegroup’s Evergreens project. The group is using the pre-cast method of construction for this project and says it will save at least 10-20% in costs.
Also See Minimalist Approach (pdf)
Architect Sanjay Puri, while designing for three 30-storey residential towers in suburban Mumbai’s Malad, decided to replace vertical fins, an elevation feature, with concrete slabs to conceal toilet ducts in the apartments.
“This single change saved almost Rs1 crore of expenditure,” said Puri, head of Sanjay Puri Architects Pvt. Ltd. “Elaborate is out, minimal is in in today’s structures.”
Puravankara Projects, in its budget housing project in Chennai named Provident Cosmo City, has similarly toyed with various aspects of construction to stick to a Rs16-18 lakh price tag, after inputs from its research unit and customer surveys.
The living rooms in the apartments still have fancy vitrified flooring but the bedrooms have cheaper, ceramic tiles. The difference in cost is at least Rs15 per sq. ft. Also, the passage way to the bedrooms has been done away with to reduce space and, to cut wiring costs, only the living room has an air-conditioning point.
“A lot of thought has gone into designing the project because you are catering to a different customer segment, mostly first home buyers, and you can’t afford to reduce (the) value of the product,” said Ashish Puravankara, director, Puravankara Projects.
Nishikant Patil, 32, a restaurant owner in Thane, Mumbai, has a budget of Rs30 lakh for a home, and he doesn’t care for the frills. “It is only now that I can actually choose a home for myself because there are options available. I am not bothered about nature of tiles or design,” said Patil, who has just started hunting for a two-bedroom flat.
Last August, Mint reported on some builders trying to cut costs by importing cheaper, Chinese building material when demand had started waning. By the start of this year, nearly all developers had resorted to various means to tighten budgets and lower expenditure.
Many of the new buildings are doing away with large basement car parks and replacing them with open car parks as a cheaper option. No fancy podiums or elaborate facades either.
Unitech, India’s second largest developer by market value, has adopted a process called value engineering to lower its building costs, by which it expects to save around Rs600 crore this year.
Value engineering involves standardization of systems, technologies and processes, said a company spokesperson. Unitech has also done away with frills that increase construction costs and has been importing cheaper tiles, sanitaryware and bathroom fittings from Malaysia and China since last year.
“Developers are also cutting costs by launching in small phases… If you try to sell 1,000 apartments at a go-and-begin construction and end up selling only half of it, then you are in trouble. Some builders are constructing only the number of units that can be sold,” said Aashiesh Agarwaal, an analyst with brokerage firm Edelweiss Capital Ltd.
Execution of projects holds the key, say developers.
Tata Housing Development Co. Ltd, in its first low-cost housing project in a distant Mumbai suburb, is working on getting the formula right. Its project will only have two storey buildings instead of taller towers because the former is cheaper. There will be no elevators.
“(The) time to finish 1,500 apartments is 15 months and we will start work at three-four locations to stick to the deadline,” said Rajeeb Dash, general marketing manager of Tata Housing.
Close monitoring of a project by controlling inventory and judicious sourcing of raw material saves at least 5-7% of the cost, said Sanjeev Srivastava, managing director, Assotech Ltd.
As prices get lower and more affordable houses are being built, the developers’ margins are getting slimmer.
“Ever since the downturn has squeezed out margins, developers are cautious about cost-structures. All wastages are being taken care of (and) there is micro-management on each project site to optimize implementation,” said Abhisheck Lodha, director, Lodha Developers.
Lodha, traditionally known for building luxury homes, has ventured into mid-segment housing priced at Rs12-25 lakh.
Bangalore-based Ozonegroup, which is using the pre-cast method of construction for its Evergreens project, says it will save at least 10-20% in costs if it is executed well. “We are also trying to avoid reconstruction as much as possible. This sometimes saves 10% of the cost,” said K.S. Sudarshan, chief operating officer of Ozonegroup.
An analyst said that pre-cast buildings and such standardized norms will kill the customized and individual flavour of homes. “Most of these projects will be like prototypes where pricing is of utmost concern,” he said on condition of anonymity.