Tuesday, September 15, 2009

DLF does the unusual: asks buyers to price homes

DLF does the unusual: asks buyers to price homes
New Delhi
DNA Hindustan Times

DLF Ltd is doing something not yet seen in the realty space: it plans to derive prices of its new residential projects by asking customers how much they are ready to pay. The developer, through designated brokers, has sent thousands of SMSes to potential customers for its Capital Greens project Phase II in New Delhi, seeking feedback on price.

"We started doing this in August. The idea is to have a scientific method of arriving at the price rather than deciding it on our own. This is the first time we are doing such a study, and we will continue this practice for other new projects," DLF's group executive director Rajeev Talwar said.

The survey looks at variables such as household income, floor preference, current residential location, offer price and facilities such as gym etc to arrive at what's called an "amicable" pricing.

Talwar said the worst is over so the flats will be sold at a premium compared with Phase I. DLF is looking to offer 1,900 apartments in its new project after Dusshera or September-end, which would be priced at least 15 percent higher from the Phase I price of Rs 5,500 per square feet.

When the developer launched Phase I in April, it sold flats at half the price of similar projects in the vicinity. That helped the company sell the whole phase in a day.

In Phase II, DLF would offer flats of 1,200-2,600 square feet sizes. It expects to finalise the pricing in a week.

DLF had bought the parcel of land from DCM Shriram in 2007 through a Rs 1,675 crore deal. An analyst with a foreign brokerage, who covers the company, found this a "fair way" to price.

"If DLF continues this model for all its projects, it would see good demand; this is a free-market mechanism. But the downside is that margins may take a hit as pricing could always be on the aggressive side," the analyst said, on the condition of anonymity. Ambar Maheshwari, director investment advisory at DTZ, the realty consultant, said home prices seem to have bottomed out.

"The rate of slowdown in the real estate sector has definitely subsided. But it is difficult to forecast as when we can expect the levels of 2007 and early 2008 volumes," Maheshwari said.

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