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Crisis bites: Realtors dress up projects in luxury frills

As prices in the real estate sector face a downward pressure and volumes too witness a fall, developers seem to be dishing out only luxury projects - or rather all projects that are launched are claimed to be luxury ones. Sachin Dave reports.

india Updated: Oct 04, 2011 21:24 IST
Sachin Dave

As prices in the real estate sector face a downward pressure and volumes too witness a fall, developers seem to be dishing out only luxury projects - or rather all projects that are launched are claimed to be luxury ones.

"After the Tata group launched affordable homes, every developer seemed to be making a rush for affordable housing. And now almost all projects launched in the market are luxury ones," said Pranay Vakil, chairman, Knight Frank (India).

According to an industry estimate, in the past 9 months about 80% of the projects launched in Mumbai and National Capital Region (NCR) are positioned as luxury product.

"There are only two ways of making profit, either you increase your volumes or your margins. Developers seem to be taking the easy way out, that is increase their margins by launching only high-end units," added Vakil.

Often, say industry observers, many developers are merely charging premium, over and above the peaked prices, claiming that the project is a luxury project, and hence costs more. Like a well-known developer in Mumbai is selling a two-bedroom apartment at Rs 12,000 per sq ft in Borivali (east), when the going rate is only around Rs 8,500 to Rs 9,000. And more often than not these luxury projects only boast of swimming pools and gymnasiums than anything else.

Another well-known developer is selling one and two-bedroom apartments in Raigharh district outside Mumbai for Rs 5,000 to Rs 6,000 per sq ft claiming that those are luxury projects.

"The place where these apartments are coming up does not have any transport and falls in a low lying area," said a potential buyer.

According to Cushman & Wakefield's (C&W) annual report "Embracing Change - Scripting the future of Indian Real Estate" major cities in India would see a total demand of 2.3 million units of residential property in next five years. "Of this 16% would be high-end units."

"The rise in interest rates has impacted the affordable housing the most but the high-end segment is relatively better placed," said Anand Gupta, general secretary, Builders' Association of India.

Industry experts say the ready-for-possession luxury projects are witnessing some demand but buyers are hard to come by for the under construction projects.

However, local brokers say that demand for one-bedroom apartments in Mumbai still remain high. "Very few developers are making 1BHKs now, there are only 2BHKs available in the Western suburbs (of Mumbai) and most of these are pegged as luxury projects," said Rajesh Khar, a real estate broker based out of Borivali.

Analysts say that the sales in the coming months are expected to be better due to festive season. "Yet the real test for developers would be post December, around January. That is the period when the volumes started dipping in 2008," added Vakil.