Conversion rates in affordable housing projects still lackluster

Conversion rates in affordable housing projects still lackluster
The Financial Express, Corporates & Markets, February 26, 2009, Page VIII

Mona Mehta Mumbai, Feb 25

Despite many top builders offering discounts of 15% to 20% on future affordable housing projects, which are yet to be constructed, the actual bookings for apartments at the revised market rates by potential end-buyers has started happening to the tune of 5% in the fourth quarter of the financial year200S-09.

At the same time, top builders and international property consultants say endusers have started inquiring about future projects this quarter, which was not the case during the previous quarter.

This comes as a relief to realty players since even transaction inquiries were on hold during the quarter ended De¬cember200S due to the liquidity crunch. But with the Central government announcing three stimulus packages in the last 60 days, the scene seems to have improved. Anuj Puri, chairman and country head, Jones Lang LaSalle Meghraj (JLLM), said, ''While the demand continues to be good, the degree to which potential buyers are responding to their needs is minimum, in anticipation of the large scale market rationalisation."

Jayant Gandhi, general manager - marketing and sales, Mayfair Housing Private Ltd said, "For our upcoming Mayfair Housing project in Virar, we have witnessed 1,000 footfalls since January 2009 and SO bookings. The booking rate at which builders are launching their properties is based on the revised market rate.”

According to Pawan Malhotra, managing director and chief executive officer, Mahindra Lifespaces, "There is a 300010 increase in enquiries by end-buyers this quarter. Apart from dropping prices, what is needed is personal negotiation between builders and endbuyers."

Hiranandani Constructions is now planning to develop affordable housing projects in Pune (between Rs 15 lakh and Rs 30 lakh for two and three BHK flats), said Niranjan Hiranandani, its managing director.

With bottlenecks such as high inflation and soaring in¬terest rates dampening the demand in the realty sector, major developers have started focussing on affordable housing in Mumbai, Delhi and Bangalore, as well as in emerging cities such as Pune, Ahmedabad, Lucknow, Kochi, Indore and Gurgaon.

According to Puri, "The market is headed for rationalisation and sustainable growth. The days of spectacular price rises are over. In residential, developers have been forced to take a serious look at the requirements of the common man - a segment that they had, to a large extent, been ignoring. In commercial, the sudden drop in the fortunes of the global IT community has put a brake on indiscriminate project launches and exuberant rentals. Whatever happens from now, will happen around the real needs of real people with real business plans and aspirations."

Residential constitutes 80% of the overall demand for India's real estate, which is now almost entirely end-user driven. While the demand continues to be at that level, the degree to which potential buyers are responding to their needs has dropped in anticipation of large-scale market rationalisation.

Today, there is little potential for the traditional profit avenues associated with real estate development. The highest real-time demand is now for affordable housing in residential and compact, efficiently managed projects in commercial, Puri added.