End-users win the race, finally

End-users win the race, finally
ET Realty, May 1, 2009, Page 24

With investors disappearing from the market, end-users can now enjoy tailor made projects made especially for them. ET Realty explores

FOCAL POINT

Now, as investors have disappeared from the marketplace, endusers are the main customers. This has forced developers to focus on the need of endusers The recent slowdown in the sector has given a push towards affordable and low-cost housing projects. Many developers are focussing on smaller square footage houses now

Prabhakar Sinha

The present downturn has resulted in a boon for endusers. Not only have the prices of apartments declined drastically, but today, end-users can also bargain hard with developers to get a better location and amenities. Earlier, when investors used to constitute the major portion of the customer base, end-users could not influence developers to meet their requirements, during the construction of the building. Till six months ago, real estate was attracting huge investment from investors, who bought properties to sell them later for a profit. Investors are hardly interested in the quality of construction and other amenities, which are necessary for those who plan to live in those buildings.

But, now, as investors have disappeared from the marketplace, endusers are the main customers. This has forced developers to focus on the need of endusers. However, endusers in the present market must ensure the genuineness of a builder before buying from his projects. Most of the developers are overstretched and are under huge debt. Therefore, the advance money they take might be diverted to pay off the debt they have already taken. This will delay the project.

The global realty consultant Cushman and Wakefield (C&W) says the present downturn will result in the consumer gaining trust, which was lost in the developer community earlier with homes being made for investors. Houses will now be designed keeping endusers' budget in mind.

Developers are also adopting regional strategies to account for local conditions. In Haryana, developers are launching independent floors, especially after the policy change by the state government, where independent floors can be registered. This will lead to reduction in prices with independent floors now available in the range of Rs 20 lakh to Rs 50 lakh, which has seen a strong absorption.

The recent slowdown in the sector has given a push towards affordable and low-cost housing projects. With government becoming proactive in formulating policies to this effect, viz, by reserving certain homes for BPL families, reducing stamp duty and registration costs across various states, reservation of economically weaker section (EWS) homes in townships (generally 10% reservation), etc, it has been a boon for endusers, says C&W.

Year-2009 has seen the rise of affordable housing. Many developers are starting to focus on smaller square footage houses in order to bring down the ticket size of houses so as to bring them under affordable category for endusers. This move will additionally reap the advantage of the differential interest rates for loans under 20 lakh for endusers. The public sector banks are giving loan up to Rs 20 lakh at 9.25% as against 10.25% for more than Rs 20 lakh for 20 years. The change in the interest rate by one percentage point from 10.25% to 9.25% leads to reduction in the EMI by Rs 1,316 from Rs 19,633 to Rs 18,317 on Rs 20 lakh loan for 20 years.

However, despite all these good offers, endusers are not buying apartments. As the general expectation is that the sector and economy will witness a revival from the third quarter of 2009, prices will go up in due course. To catch those rising prices, some developers are considering undertaking projects without selling them to endusers at present and mobilising money for construction. And, this is a conscious strategy.