Prudent realty pricing, timely execution will help push sales

At the beginning of 2012 there was a positive signal for home buyers when the Reserve Bank of India changed its stance from addressing inflationary concerns to ensuring growth by easing liquidity. Though the absorption rate recorded a marginal rise sequentially across prime cities in the first quarter of the calendar year 2012, the probability of this trend being sustained will depend on prudent project pricing and timely execution.

Buyers have become very cautious about their investments. Projects which were launched in the price band of more than Rs 7,500 per sq. ft took longer to sell. Prices of projects launched in 2009 in the under 2,000 per sq. ft price band escalated rapidly in 2010, thereby negatively affecting their absorption.

Since buyers of projects in the price band of Rs 3,000 per sq. ft or below are price sensitive “need-based buyers”, their ability to afford houses diminished during the times of hardening interest rates. The segments of buyers in the price band of at least Rs 7,500 per sq. ft were predominantly “aspirational buyers” who could choose to postpone their buying decision.

Hence projects in the price band of Rs 3,000-Rs 7,500 per sq. ft have a lower percentage of unsold stock compared with the other two categories.

Also See | Realty Check (PDF)

Edited excerpts from a report jointly initiated by Jones Lang LaSalle and Confederation of Indian Industry. Comments are welcome at mintmoney@livemint.com