Pricing it right
HT Estates, June 20, 2009, Page 1
Does the real estate scenario look as bleak now as it was six months ago? Not really, thanks to the concept of ‘affordable’ that met with a positive response from the consumers targeted and generated some kind of a movement in the market. And now, another concept has been worked out that’s likely to get the buyers a little more excited — it’s referred to as right pricing. Projects like BPTP’s ParkElite Floors in Faridabad and Jaypee Aman in Noida, among others, come in this category and the market is defined by projects where costs range from Rs 15 lakh to Rs 25 lakh.
What is right pricing? It is neither low-cost housing nor it is affordable housing. Low cost housing means compromising on many aspects of construction, and affordable housing comprises flats in the range of Rs 25 lakh to Rs 35 lakh. With right pricing the product is developed keeping in mind the facilities required bythe end-user and giving him value for money.
No compromise
“It need not result in a compromise on quality or amenities.
Land acquisition rate for many developers, the current construction cost and right judgment of price points should be the key drivers.
Only in case of low cost or affordable housing would quality and amenity level change as compared to high cost/ luxury housing,” says Prashant Kaura, co-founder of realty consultancy GenReal.
Right designing
So, how do the developers manage to get the prices right? Amit Raj Jain,VP (marketing), BPTP, clarifies, “It is all about right designing and efficiency.
We used to, earlier, have larger homes of 1500 sq.ft or more for three bedrooms but now with maximum utilisation and proper designing we are being able to achieve it in smaller spaces and hence the benefit of cost cut is being transferred to the end-user.” Seconds Manu Goswami, head (marketing and sales), Jaypee Greens: “Aspects of designing are helping us develop products with right pricing. Developers are cutting down on circulation spaces;we are planning keeping in mind the target area.
And to say that the spaces will look cramped will be wrong – our three bedroom apartments cover around 1200 sq.ft.” The trend has picked up recently as the demand for right pricing has increased.
“Earlier people used to speculate while purchasing a house. If the requirement was for 1200 sq ft of space, they would opt for more than that keeping future needs in mind; but now if the buyer requires 1200 sq ft, he is settling for lesser space area keeping in mind his budget. So the question of congestion doesn't arise as it all comes to right efficiency and better designing,” says Jain.
However, Kaura is of the view that “Congestion could be a fall-out of increased FSI norms.Also, it could put pressure on physical infrastructure put up by the government authorities.”
The need
Now the question is, why are developers suddenly going in for ‘right priced’ projects? The inventory, in this case land or built up space, didn’tsee much movement during Q4 2008 and Q1 2009, for most developers across India. This prompted many developers to determine the price range where endusers/investors would re-enter the market. “It was critical for developers to start closing transactions and see cash flow to kick- start new projects while continuing their attempts to complete the half done developments,” says Kaura.
The Government, more specifically RBI, reduced the risk weightage for housing loan up to Rs 20 lakh, resulting in relaxation of lending norms for housing loans.
“This has resulted in an increased interest from one segment of end-users. Also in some locations the development authorities have increased FSI allowing the developers to pass the benefit to end-users, making right pricing possible,” says Kaura.
The developers,adds Kaura, are able to afford the right price concept because of several reasons,which are:
In some areas the FSI has increased allowing the developers to pass on the benefit to the buyers.
Correction has taken place in values across all cities and micro markets. All new projects would have rates that are more rational compared to the highs seen in 2007-08.
New areas have now come up for development such as the extended golf course road or Sector 33 in Noida.These locations,while slightly on the outskirts, are good investment opportunities in the long run and are already very well connected to the rest of the developed areas
Confidence levels among both developers and investors have increased ever since a stable government was formed.
Also, the economy has started showing signs of stability if not a revival.
Realty expert Abdul Bari says that because of this the cost of construction has come down.
“In open floors the developer does not haveto put up a lift and other utility areas are also not required.The usable area is less, say, for an open floor of 300 sq yd the built-up area is around 1400 sq ft and for 250 sq yd it is around 1200 sq ft. So the construction cost becomes less and here the developer has to build atthe most two floors.All these translate to cost savings,which in turn translate to right price for the end-user.”
Where do you get the price right?
Right priced projects can be found at extended Golf Course Road in Gurgaon, Sector 33, Gurgaon, Greater Noida Expressway, NH 8 and Faridabad. According to Jain, right pricing does not mean that a developer should develop the property in some far off and remote area. "Right pricing is all about right value for money," adds Goswami.
HT Estates, June 20, 2009, Page 1
Does the real estate scenario look as bleak now as it was six months ago? Not really, thanks to the concept of ‘affordable’ that met with a positive response from the consumers targeted and generated some kind of a movement in the market. And now, another concept has been worked out that’s likely to get the buyers a little more excited — it’s referred to as right pricing. Projects like BPTP’s ParkElite Floors in Faridabad and Jaypee Aman in Noida, among others, come in this category and the market is defined by projects where costs range from Rs 15 lakh to Rs 25 lakh.
What is right pricing? It is neither low-cost housing nor it is affordable housing. Low cost housing means compromising on many aspects of construction, and affordable housing comprises flats in the range of Rs 25 lakh to Rs 35 lakh. With right pricing the product is developed keeping in mind the facilities required bythe end-user and giving him value for money.
No compromise
“It need not result in a compromise on quality or amenities.
Land acquisition rate for many developers, the current construction cost and right judgment of price points should be the key drivers.
Only in case of low cost or affordable housing would quality and amenity level change as compared to high cost/ luxury housing,” says Prashant Kaura, co-founder of realty consultancy GenReal.
Right designing
So, how do the developers manage to get the prices right? Amit Raj Jain,VP (marketing), BPTP, clarifies, “It is all about right designing and efficiency.
We used to, earlier, have larger homes of 1500 sq.ft or more for three bedrooms but now with maximum utilisation and proper designing we are being able to achieve it in smaller spaces and hence the benefit of cost cut is being transferred to the end-user.” Seconds Manu Goswami, head (marketing and sales), Jaypee Greens: “Aspects of designing are helping us develop products with right pricing. Developers are cutting down on circulation spaces;we are planning keeping in mind the target area.
And to say that the spaces will look cramped will be wrong – our three bedroom apartments cover around 1200 sq.ft.” The trend has picked up recently as the demand for right pricing has increased.
“Earlier people used to speculate while purchasing a house. If the requirement was for 1200 sq ft of space, they would opt for more than that keeping future needs in mind; but now if the buyer requires 1200 sq ft, he is settling for lesser space area keeping in mind his budget. So the question of congestion doesn't arise as it all comes to right efficiency and better designing,” says Jain.
However, Kaura is of the view that “Congestion could be a fall-out of increased FSI norms.Also, it could put pressure on physical infrastructure put up by the government authorities.”
The need
Now the question is, why are developers suddenly going in for ‘right priced’ projects? The inventory, in this case land or built up space, didn’tsee much movement during Q4 2008 and Q1 2009, for most developers across India. This prompted many developers to determine the price range where endusers/investors would re-enter the market. “It was critical for developers to start closing transactions and see cash flow to kick- start new projects while continuing their attempts to complete the half done developments,” says Kaura.
The Government, more specifically RBI, reduced the risk weightage for housing loan up to Rs 20 lakh, resulting in relaxation of lending norms for housing loans.
“This has resulted in an increased interest from one segment of end-users. Also in some locations the development authorities have increased FSI allowing the developers to pass the benefit to end-users, making right pricing possible,” says Kaura.
The developers,adds Kaura, are able to afford the right price concept because of several reasons,which are:
In some areas the FSI has increased allowing the developers to pass on the benefit to the buyers.
Correction has taken place in values across all cities and micro markets. All new projects would have rates that are more rational compared to the highs seen in 2007-08.
New areas have now come up for development such as the extended golf course road or Sector 33 in Noida.These locations,while slightly on the outskirts, are good investment opportunities in the long run and are already very well connected to the rest of the developed areas
Confidence levels among both developers and investors have increased ever since a stable government was formed.
Also, the economy has started showing signs of stability if not a revival.
Realty expert Abdul Bari says that because of this the cost of construction has come down.
“In open floors the developer does not haveto put up a lift and other utility areas are also not required.The usable area is less, say, for an open floor of 300 sq yd the built-up area is around 1400 sq ft and for 250 sq yd it is around 1200 sq ft. So the construction cost becomes less and here the developer has to build atthe most two floors.All these translate to cost savings,which in turn translate to right price for the end-user.”
Where do you get the price right?
Right priced projects can be found at extended Golf Course Road in Gurgaon, Sector 33, Gurgaon, Greater Noida Expressway, NH 8 and Faridabad. According to Jain, right pricing does not mean that a developer should develop the property in some far off and remote area. "Right pricing is all about right value for money," adds Goswami.
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