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Bengaluru/Mumbai: The market for high-end homes may be shrinking in the aftermath of a three-year-long slowdown and the government’s demonetisation drive because customers are deferring purchases, few developers are able to afford new launches and prices are under pressure.

The premium residential market in the National Capital Region (NCR) has been hit with several investors giving up on real estate and nervous home buyers staying away from expensive properties.

In this environment, ‘build-and-sell’ is becoming the preferred model in the luxury segment as it not only assures prospective buyers, but also helps developers get a better price.

India’s largest developer, DLF Ltd, has just started sales of the third and last phase of Crest, a Gurugram project with around 250 luxury residences. The super structure of the towers has been built and DLF expects construction to be completed by the December 2017 deadline.

DLF expects the third phase to fetch a premium because the apartments being sold will be ready to move in.

“Customer confidence was shaken in the last 2-3 years. We could have sold at a discount, but we didn’t do that. Instead, we decided to complete construction because our target buys—NRIs and professionals—want finished products or homes that they can touch and feel," said Aakash Ohri, senior executive director, DLF 5.

Developers are not only looking at different strategies to sell expensive homes but also watching the market before launching fresh inventory.

“In the current scenario, premium projects have to be treated individually, depending on the demand and sales. While we are focusing on execution and sales this year, we have one new launch in the luxury segment in Mumbai and a second one in another city," said Rajeev Piramal, executive vice-chairman and managing director of Mumbai’s Peninsula Land Ltd.

The company launched its luxury project in Byculla around the time demonetisation was announced. While enquiries reflected strong demand for the project, customers are waiting to see if there will be a price correction, Piramal said. In its project in Sewree, as the micro-market is slow, Peninsula is moving towards completing the project in order to get better sales.

A January report by Liases Foras Real Estate Rating and Research Pvt. Ltd which assessed the impact of demonetisation, said luxury and plotted development projects are the most impacted, compared to mid-segment and affordable housing. While developers catering to luxury are likely to face liquidity issues, land has been a favourite asset to park black money.

“The outlook is not positive because we already have 18-19 months of inventory in most projects; absorption has been very slow. Prices may not really go up at all. Investors are wary of the luxury market and those who are ready to buy stock are looking at discounted value. NCR and Mumbai luxury projects have been the most affected," said Pankaj Kapoor, managing director of Liases Foras.

Property analysts said maximum delays have been faced by premium projects, where sales have slowed and cash flows have been tepid, leading to developers delaying completion.

“It’s clear that for ultra luxury projects, you have to stick to what you promise, you have to deliver on time and ensure you satisfy the consumer. I don’t see too many people completing their projects on schedule. But there is significant premium for close to completion projects," said Vinod Rohira, managing director and chief executive officer (commercial real estate and REIT), K Raheja Corp.

The company is currently selling the second phase of its Vivarea project in Mumbai. The first phase and 60% of the second phase has already been sold.

“We are selling around 40% of the remaining stock later after completion because we believe that premium ready-for-possession and delivered-as-promised projects will be in high demand," Rohira said.

Only a handful of developers have fresh launches in the pipeline.

This year, Mumbai’s Lodha Group will deliver its iconic World One project and Lodha Altamount, following World Crest which was completed in 2015. The firm will also start selling residences in a yet-to-be launched Mumbai project and at 1 Grosvenor Square in Mayfair, London.

“2017 is an extremely exciting year for our luxury portfolio. While the general economy in India has taken a short-term impact due to demonetisation, we believe that the medium- and long-term benefits will go a long way. ...We are very confident that our luxury developments will continue to see extremely strong demand and will showcase the kind of quality that India is capable of delivering," said Abhishek Lodha, managing director, Lodha Group.

Mumbai-based HBS Realtors is also planning to launch HBS View 360 near Haji Ali by end-January, a boutique project of 30 units priced at 10-20 crore.

“Our entire philosophy is moving towards build and sell or near-build and sell," said Sandeep Shah, managing director, HBS Realtors.

“The market is at the moment definitely slow. It gives you an opportunity to push for ready stock than the under-construction ones and one gets very good price when the project is ready compared to selling it at very early stage."

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