New Delhi/Bangalore: When Mumbai-based developer Nahar Group of Companies opened booking for two new buildings at its Nahar Amrit Shakti project in Powai, a central suburb in Mumbai, it was surprised by the demand it received from buyers.
Nahar says it managed to sell 150 of the 320 flats it had on offer on the second day of booking itself. “We have now sold close to 300 flats,” says Manju Yagnik, Nahar’s vice-chairperson. “We never expected so much demand.”
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Is demand for property starting to pick up or are examples such as the Nahar Amrit Shakti project just hype?
Developers, who had frozen the launch of new projects till end-2008, have in the last few months launched several projects that suit mid-income budgets—clubbing them under an all-inclusive “affordable” housing segment. Realty firms say such projects are seeing good demand. This could not be independently verified by Mint, with one housing financier saying there was a small turnaround in demand for loans, but it was not widespread.
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Mint reported last month that buyers were slowly returning to the housing market, but the demand was mostly restricted to ready-for-possession flats.
The experience of top developers such as DLF Ltd, Unitech Ltd and Housing Development and Infrastructure Ltd, with have offered flats at prices lower than prevailing market rates in the past three months, suggests that demand is spreading to new projects.
DLF launched Capital Greens in west Delhi at an inaugural price of Rs4,500-5,500 per sq. ft and the project, consisting of 1,356 flats, has been sold out, it says.
Similarly, Unitech launched Uniworld Garden II in Gurgaon, south-east of New Delhi, at prices between Rs28 lakh and Rs40 lakh a flat. The project of 750 was sold out in 45 days, the company says. Encouraged by the response, Unitech has launched another project, The Residences, also in Gurgaon, with prices at Rs35-45 lakh. It has so far sold 180 of 200 flats in that project.
Parsvnath Developers Ltd launched a 510-flat project in Lucknow in March, pricing each flat between Rs12.5 lakh and Rs24 lakh; around 480 has been sold out, the firm says. A price cut of up to 30% by developers, launch of projects at key locations and a reduction in home loan rate seems to be attracting buyers for some projects.
R. Karthick, vice-president, marketing, of Lodha Group, a Mumbai developer, claims that his company has sold nearly 2,500 flats in five months. Lodha has launched five projects in suburban Mumbai, under the mid-segment brand Casa, priced at Rs30-35 lakh. Lodha, which is typically known for its luxury projects in Mumbai, launched this brand after seeing slow demand in the last few months of 2008.
Priced low: An image of a Lodha Group project. The firm has launched 5 mid-segment projects in Mumbai.
Puravankara Projects Ltd has said it has 600 flats in its maiden budget housing venture, Provident Cosmo City in Chennai, since its launch in March. Three-bedroom flats there are priced at between Rs16.9 lakh and Rs18.9 lakh. “The sales in the Provident project were so good that we are planning to launch 4,200 flats in the same category in north Bangalore now and expand further,” says Ravi Ramu, director, finance, at the Bangalore-based firm.
Some experts say though demand is slow to return to the market, it is likely to be more sustained this time because demand for housing is from buyers who intend to live in the flats rather than those buying them as investments. “The good news is that it is mostly end users who are buying,” says Shruti Gupta, head of real estate consultancy Hamptons International’s India unit.
Lodha said it sold 600 units in 10 days in one of the projects, Casa Bella, in March in Mumbai’s Dombivali area. “There may be some investors, but 63% of the buyers are mid-management professionals and 7% are self-employed,” says Karthick.
Anshuman Magazine, managing director of realty consultant CB Richard Ellis, says: “I will not say that sales are picking up, but the thaw has started to happen. A developer who has a project at a lower rate has been able to get buyers.”
The first quarter of the calendar year has brought some relief for developers, who are finally seeing some demand compared with last year, when buyers had virtually disappeared.
Mumbai-based Akruti City Ltd told Reuters on 15 May that it has seen sales going up by 30% in the first quarter of the current fiscal after a near 80% fall in the last two quarters of the year to 31 March. Magazine agrees that it is the pricing and the location that are bringing back buyers into the market. “Developers have repositioned their projects,” says Magazine. “They are launching projects at good locations to halfway good locations.” Firms such as DLF, India’s largest realty company by market value, now plans to focus on city-centric and mid-income residential projects, and plans to launch 17-18 million sq. ft of residential projects in fiscal 2010. Earlier, most developers focused on developing luxury homes in far-off locations.
Lower interest rates for housing finance—down from 12% in fiscal 2008 to 8% in recent months—have helped.
The fact that developers are offering construction-linked payment plans is a huge incentive for buyers, says Sanjay Sharma, managing director of Gurgaonscoop.com, a real estate brokerage. “Buyers now feel assured that they would not need to make payment if the construction is stalled,” says Sharma.
A spokesman for mortgage lender Housing Development Finance Corp. Ltd said enquiries and applications for home loans have been increasing every month. In the fourth quarter of last fiscal year, “loan approvals have gone up by 21% and loan sanctions have increased by 16%” from the year-ago quarter, the spokesman said. “There is sporadic demand for projects though it is far from a revival.”
HSBC Holdings Plc.’s India operations does not see a significant uptake in the home loans sanctioned in the last few months, according to Ravi Subramanian, head, retail assets and cards, at the lender. In April, he had told Mint that almost all of its new sanctions are in the ready-to-move-in flats category.