Builders splurge on sample flats to woo high networth buyers amid slump
Mumbai: How does one sell a Rs.10 crore apartment in a depressed market for up-market realty? The answer some builders have found is to first spend as much as Rs.25 crore on building a sample apartment, complete with the inner bells and whistles that a likely owner of such a home is likely to have.
Creating sample flats to lure customers both in the mid-and high-end segment has been one of the age-old marketing strategies by developers.
However, with increasing competition and piling inventories particularly in the luxury segment, developers are now willing to throw every penny to entice potential home buyers in showcasing what they are offering to the customers.
According to Liases Foras, a real estate advisory firm, sales of the luxury houses have been declining over the last few years.
In its latest report released on 15 August, luxury homes which cost above Rs.2 crore dropped by 10% in the June quarter while the overall home sales in India’s top eight cities grew 9% during the same period.
Real estate firms such Omkar Realtors & Developers, Lodha Group, Oberoi Realty Ltd and Rustomjee Developers are splurging on creating sample flats in an effort to attract high networth individuals and ultra-rich buyers including Bollywood stars for its luxury flats. These developers are spending between Rs.4 crore to Rs.25 crore on building the show flats, sourcing decorative items from abroad and hiring international designers and architects for the purpose. The normal spend on building sample flats for a premium home was around just Rs.70- Rs.80 lakh four-five years ago,
This is over and above the other marketing tactics like offering incentives by developers to woo customers. Common gifts to customers include cars, gold coins, free parking spot or even international flight tickets but few developers in the recent past have gone beyond rolling out freebies to woo potential buyers.
For instance, earlier this year, Mumbai-based DB Realty offered its clients a helicopter tour of its luxury residential project DB Crown at Prabhadevi to provide an aerial view of the construction site. Others like Piramal Realty organized flower shows at the project site of its first residential project in Thane end of last year to help gain popularity of the project.
“There is an aspirational value attached for customers of such high-end and luxury homes. Enhancement in product and visual appeal is very important in the current stressed market and developers would continuously look for ways to cut through the clutter. Hence unlike lower priced homes where it is easier to sell, builders would increase their effort in creating sample flats especially to showcase the opulence,” Pankaj Kapoor, chief executive officer (CEO), Liases Foras.
Other realty brokers say that sample flat is one of the essential tools used by builders currently to boost sales and confidence among customers and fix the lack of trust with the builder community.
For instance, Mumbai-based Omkar Realtors & Developers has spent around Rs.25 crore only on creating the 8,000 sq.ft. show flat for its uber-luxury project ‘1973’ at Worli in South Mumbai. London-based design company Hirsch Bendner Associates has been hired to design the sample flat. Customised kitchen from Germany-based firm Alno has been used for the sample apartment.
There’s more in store. Collectables including artifacts and artworks are sourced from across 50 countries just for the sample flat. Swarovski artworks, paintings worth around Rs.8-9 lakh by renowned artists like Kalpana Shah and Jagdish Chandra have been bought to decorate the walls of the show apartment. Furnishings and upholstery have been imported from Spain, Italy and the UK, said Amar Tendulkar, president (design), Omkar Realtors & Developers.
“Through the sample flats, we are trying to cater to different categories of people right from movie stars to corporate leaders who understand and have taste for luxury. So what we are doing is how we do make this show apartment appeal to all of them,” he said.
Mumbai-based Oberoi Realty, country’s second largest real estate firm, is also gearing up to open its much awaited show flat for its luxury project 360 West to the buyers this month. The company has spent as much as Rs.8 crore on building sample flats for the project. The Investment accounts 15-20% of the cost of a single flat in the project. Apartments in the project are sold above Rs.45 crore.
“It is imperative to do a show apartment or sample flats mainly to show the transparency and communicating the world that this is the potential of the product that we are selling,” said Vikas Oberoi, chairman and managing director, Oberoi Realty Ltd.
According to brokers and consultants, developers spend around Rs.1-Rs.4 crore to build a typical show flat of a luxury apartment in south Mumbai. “When people want to see something tangible or when builders want to convince the buyers, making a sample flat is an effective tool to boost sales. Sample flats are also used to fix the gap that people don’t buy until they can’t see it,” said Prakash G. Rohiira, a real estate agent who sells luxury apartments in south Mumbai.
For Lodha’s World Towers, the upcoming residential project, the sample flat is not a makeshift one. The company, which has tied up with Giorgio Armani as an interior designer for the project, uses an actual 7,200 sq.ft .four-bedroom apartment designed by Italian designer’s team to showcase to its customers. The apartment has a sundeck, master bathroom with an outdoor Jacuzzi and a home theatre lounge done in handcrafted gold leaf finish.
According to Samujjwal Gosh, deputy chief executive officer (Pune) and executive vice-president (marketing), Lodha Group, the concept of show flats have evolved over the last 10 years and has become an essential part while marketing the residential projects as it helps aid in their buying decision.
“Real estate in India, especially in Mumbai has been transforming from a commodity sale based on price (some 4-5 years ago) to an experiential, high involvement purchase… Customers are looking for the best deal in the best product and this prompts them to get into all aspects of pre, during and post sales,” Ghosh said.
Prasoon Bhat, a financial analyst which has bought a 3BHK flat for Rs.12.5 crore at Omkar’s 1973, said sample flats help in aiding the buying decision as it gives a better idea of what a buyer can expect of the flat. However, the track record of the developer is the most important criteria when looking out to buy a flat, he added.
“Normally, when we see the floor plan, we cannot make out what we can expect. We can’t think abstract. A sample flat gives a fair idea how it will shape up. When buyers can visualize the apartment, they tend to get convince with the product,” Bhat said.