Irate buyers force DLF to slash Gurgaon project rates by 20%

Irate buyers force DLF to slash Gurgaon project rates by 20%
The Economic Times, March 27, 2009, Page 5

Sanjeev Choudhary NEW DELHI

THE COUNTRY’S largest property developer, DLF, has cut prices by up to a fifth at a housing project in its home market Gurgaon, buckling under pressure from customers who are angry that not a single brick has been laid nearly a year after the venture was announced. The latest move by DLF for its New Town Heights project is its third such in about a month and follows price cuts of up to 32% at its projects in Chennai and Bangalore.

The company has told buyers at its Gurgaon project that “in order to further strengthen the value proposition”, DLF is offering a 5% discount on the basic sale price, increasing the built-up area by 5% at no extra cost and offering a 10% “timely payment rebate” on the sale price.

Customers furious about the absence of progress on the project have been demanding their money back and many of them stopped paying their instalments.

In Chennai, too, DLF’s hand was forced by buyers of apartments at its Garden City project joining forces after they saw that work had not started even a year-and-ahalf after the announcement.

DLF’s price cuts in Chennai and Bangalore triggered expectations that other big real estate firms would follow suit to try and boost sagging demand, but there have been no significant reductions so far.

Several analysts have been saying a 30-35% decline in prices is essential to spur demand. As sales dried up, credit became expensive and private equity funds vanished, property companies ran into a severe cash crunch. Realty firms have also been under pressure from banks and the government to reduce prices.

Many builders have not been making formal price cut announcements but customers driving hard bargains are able to to wangle substantial discounts. DLF’s latest move is seen pressuring other developers to bring down prices in the National Capital Region, which has not seen many firms come forward to meaningfully cut prices.

DLF launched New Town Heights almost a year ago in sectors 86, 90 and 91 of Gurgaon at a basic price of Rs 2,250 per sq ft. The project comprised three- and fourbed room apartments ranging in size from 1,760 sq ft to 2,505 sq ft and priced at Rs 45-75 lakh. Almost 85% of the total 3,147 flats have been sold, said a DLF executive.

DLF is also telling its New Town Heights customers that they will be protected from falling property rates by the company passing on the benefits of any further price reductions to them. Furthermore, it has doubled penalty to Rs 10 per sq ft per month for delay in handing over the homes.

The company has promised to deliver the home three years from date of booking by the customer, but it appears unlikely that the deadline can be met for the earliest buyers at New Town Heights.

“We are a highly compliant organisation, and we would like to start construction only after we have received the final environment clearance, which is awaited,” DLF wrote to customers.

Another DLF sweetener for its New Town Heights customers is the change in the payment plan. Whereas so far buyers were required to make periodic payments, the new plan allows those who have paid at least 35% of the cost of apartment to make their payments only when the company meets construction milestones.

LOWLY HEIGHTS

DLF launched New Town Heights almost a year ago. But so far not a single brick has been laid

Customers have been demanding their money back and many stopped paying their instalments

DLF is offering a 5% discount on basic price, increasing built-up area by 5% at no extra cost and offering a 10% “timely payment rebate”

Co will pass on benefits of any further price cuts & has doubled penalty for delays to Rs 10/sq ft per month