Unable to sell large apartments, developers are trimming them to fit the budgets of home buyers. Whether in Bengaluru or Mumbai builders are making them smaller: Radius Developers, Wadhwa Group, DB Realty or Sobha, they’ve read the writing on the wall. And when it’s a choice between profits and a pile-up — unsold units across top seven Indian cities number 7.62 lakh units — the bottomline wins.
As Mudassir Zaidi, national director, Knight Frank, points out, this is the second time in six years such tactics are being tried. “After the 2008-2009 financial crisis, companies had resorted to similar tactics so they know that a two-bedroom apartment is what is affordable,” Zaidi said.
Radius Developers is now building 350 sq ft carpet area studio apartments at less than Rs 1 crore for singles. “Our priority is to clear existing inventory,” said Ashish Shah, COO at Radius Developers. Across Chembur, Hughes Road and Goregaon, the company is now selling flats priced at up to Rs 2 crore relatively affordable in a city like Mumbai. The Goregaon property will not have penthouses but two and three bedroom apartments.
This kind of quick fix is not always easy — converting a floor plan to house four instead of two apartments means a leakage in developable area. But cash flows win over profits. Typically, a two bedroom apartment — a set of two bedrooms, a drawing room and kitchen, across 800-900 sq. ft of carpet area, are a hit with first time salaried home buyers or nucleur families.
However, builders have built luxury apartments in high-rises with carpet areas of at least 1000-1200 sq. ft. These are out of reach for the aspirational, first time consumer and, it would appear, are not finding takers even from the more affluent lot. Builders now have no option but to divide these into two flats.
JC Sharma, vice chairman and MD, Sobha Developers agrees it’s hard to sell large apartments these days and says one can tap a bigger customer base with smaller flats. In the three months to June, Sobha’s profits plummeted to a 10-quarter low, mainly because the company could not sell apartments, priced over Rs one crore. In Bengaluru, its home ground, a Rs one crore ticket size falls within the ambit of luxury apartments whereas Sobha was catering to the price range between Rs one and three crore.
In April last year, the company launched “Sobha Dream Series,” an offering which built apartments between 650 sq. ft and 1200 sq. ft, priced between Rs 50- 70 lakh. Analysts said this turnaround plan worked for Sobha and on an average a million. sq. ft of sales can be expected from this series on annual basis.“Earlier we were not present in the 1,000-1,200 sq. ft space (super built up area) but there is a huge market for these products now,” said Sharma. Sharma said this category is in addition to the premium properties that it continues to build.
In fact, 90% of a Sunteck Realty project in Goregaon has been dedicated to 2 BHKs, priced upto Rs 2.3 crore. Godrej Properties too is cashing in on this segment; its projects Trees, Godrej Central and Godrej Prime, located in the Vikhroli, Chembur areas of Mumbai are all catering to the demand of less than Rs 2 crore in the market, mainly through 2 BHK offerings
Similarly, 90% of Wadhwa Group’s project Atmosphere in Mulund comprises of 800 sq. ft units priced under Rs 2.3 crore. “Right now there is a huge demand for this product, that’s why you see a much higher percentage of this configuration,” said Navin Makhija, managing director at the Wadhwa Group. But once the tide turns in favour of bigger sized apartments, so will the contours of the buildings, Makhija added.
Last year, a report published by JLL India said that in the MMR region, apartment sizes, on an average is shorter by 27% compared to five years back.
This trend was also noticed in Bengaluru, which registered a downsize of 24%, Kolkata, where houses shrunk by 24%, Chennai which came off by 22% and NCR (national capital region), which reduced by 10%.