Northern realty goes down under

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: The desire to splurge, backed by a passion for extravagance, which was drawing the happy-go-lucky people in north India towards buying luxurious apartments seems to have fizzled out with the economic slowdown as the investors pull their hands out of the real estate projects. Even players like Parsvnath, Uppal group, Unitech, Omaxe etc coming up with projects in Punjab, Haryana and Chandigarh are feeling the heat of the recession, with some of them planning to move over to affordable housing from luxurious one.

One of the major contributing factors for fall in demand is the exorbitantly priced and opulent apartments being offered by these developers. Commenting on the present scenario, PK Jain, Advisor, Parsvnath Developers says, “Due to the downward trend in demand, buyers have postponed their buying plans for 5-6 months and are waiting for the prices to come down. We cannot reduce the prices of our apartments as the as the input costs are still high.”

Slowdown effect

Prideasia — the luxury township project of Parsvnath coming up at the Rajiv Gandhi Chandigarh Technology Park is also getting affected due to the slowdown as only 160 units out of the 1,314 proposed have been sold so far. And only six out of 34 villas have been sold. Parsvnath has priced its villas at Rs 6 crore and penthouses at Rs 4 crore. The one to five-bedroom apartments are priced between Rs 52 lakh to Rs 3.8 crore. Buyers are finding it hard to afford these highly priced apartments and villas.

Few companies are facing about 20% slump in demand but still are firm about completing their project on time. Uppal’s Marble Arch coming up in Chandigarh offers apartments ranging between Rs 1.5 crore to Rs 2 crore. A senior official shared, “Our project is near completion but now the real investor is stretching his hands to buy luxurious apartments due to liquidity crunch. We have registered 20% decline in demand of our apartments but 108 flats out of 168 have been sold. Now only the actual buyers are coming forward to crack the deals and we don’t intend to reduce the prices in the future.”

Developers undeterred

Though buyers are missing from the market but the recession has not deterred the expansion plans of Omaxe Constructions about its projects in Ludhiana, Derabassi and Baddi. “We are firm about our plans. Neither are we going to reduce our prices nor launch any bonanza scheme to lure the buyers. Though there has been a 10% fall in the demand but we will be launching five projects before January 26, 2009 as this is the right time to expand,” says DP Srivastava, Director, Omaxe.

But the company is ready to take corrective measures if the grim situation continues like slashing the prices by 5-10% in the future or by shifting focus to affordable housing from luxury housing projects. Another Omaxe official says, “We are constructing about 720 flats in Baddi. Though the bookings are on but the response is slow. The slump in the market has affected sales. Initially the company had plans to develop flats over 26 acres but due to falling demand, flats are being developed over 12 acres and 220 plots for commercial use over 14 acres have been put on sale.”

Seconding his view, SK Bajaj from Shakun Infrastructure Baddi expresses, “As the investors are pulling back their hands the demand from the companies has increased, shooting up the rentals in Baddi. We have rented out about 50-60 three-bedroom flats to Cadbury at a monthly rental of Rs 18,000 per month per flat. Even the two bedroom flats are being rented out for Rs 14,000 per month.” Where a two-bedroom flat can be rented out at Rs 5,000-7,000 in Chandigarh, its rent in Baddi is around Rs 10,000-Rs 13,000 and for three bedroom it varies between Rs 14,000-18,000.

Cautious development

A few companies have gone cautious about expanding further as they are concentrating on their ongoing projects. RK Mittal, Chairman and Managing Director, CHD Developers says, “Currently the buyers are in a wait and watch mode. The upheaval in the real estate industry was well anticipated in the light of global economic scenario, rising inflation and interest rates from Indian banks. We are concentrating on the development of our current projects at Vrindaban and Karnal so as to ensure timely deliveries to our customers. The present market scenario is not conducive to initiate new projects and any future projects will be announced only when we are confident of their viability and timely completion,” he says.

But the property consultants are of the view that the builders have to be more innovative to address the needs of the buyers. RP Malhotra from Dee Ess Estates, Zirakpur informs that in the town there are over 12,000 flats coming up and the occupancy levels are not very high. “Even though people are willing to buy, due to high prices they prefer to stay away from buying. That’s why prices will have to be slashed by the builders for further sales to happen,” he says.

Even the investment flowing in the realty sector in Punjab and nearby regions via NRIs has stopped now. “They prefer buying property abroad only as the rates have gone down there,” adds Malhotra.

Even freebies are not proving effective to attract buyers. Pawan Gupta, Director Hari Om Property Consultants says, “Companies are offering discounts to the dealers, foreign trips etc and even a car. Builders profits have also come down from 40-50% earlier to about 10-20% now. If the situation doesn’t improve, the dealers profit will be cut and the prices will be slashed further.”