Realty developers’ profit margins dip to 15-20%

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New Delhi, Jul 24: Profit margins of real estate developers have gone down from a whopping 40-50% a year or two ago to a modest 15-20% today.

The main reason being growing competition, slowdown, oversupply and increasing aspiration levels of buyers that has prompted real estate developers to cut down on their profit margins in a bid to offer the customers the best and stay afloat in the business.

Though this does not primarily mean that developers are not minting money in this period of boom, but it is not 'killing' anymore.

Experts feel that this is also a sign of a maturing market that now provides more value to the customer at the same price.

A sign of how market forces are compelling developers to evolve a more sustainable model rather than thrive on unhealthy profits.

Says Vivek Srivastava, director (marketing), Collage Group, "Though it is sad for the developers that they have to cut down on their profit margins, for the customer it is very beneficial as it gives them quality and value. Like the automobile sector, the real estate industry will also become more professional and thrive on sustainable profits rather than unhealthy ones."

Today, a villa worth a crore will include latest amenities like a Dish TV, Internet connection, a swimming pool, a jacuzzi, modular kitchen etc.

"We cannot hike the price as it will not get us the desired customer base. Further, with other builders offering the same facilities at the same cost, we have no choice but to toe the similar line. Costs can be brought down by using local hardware, but that would be a compromise with our brand name - something that we would not be interested in doing. The circulation of money is there, but oversupply and growing competition (especially from local builders) is forcing the market to behave differently," says Ranjeev Kalia, DGM (sales and marketing), Ansal Buildwell Ltd.