Housing Projects Are Back With A New Force
In order to beat the heat of recession, premiere real estate developers have started to roll on new projects so they can make up for lost time. Buoyed by the over-whelming response of customers for their affordable homes, developers from Pan India have designed housing projects of over 60 million square feet.
This is more than double the sales bookings in the past financial year.
According to the reports of the market analysts, the company which is leading this race of new launches is Unitech with almost 27 million square feet area. Next is the real estate maestro DLF who’s planning to develop 15 million square feet of area which is roughly the same as year 2008. Puravankara and HDIL are next to follow with 6 to 9 million and 8 million square feet of area respectively.
Affordable housing for the middle income group is the Mid-income housing is the flavor of this financial year and almost around 90 per cent of the new projects are designed by keeping this in mind. After a slump in the real estate sector in 2008, which witnessed sales declining 70 per cent from their peak, the pioneer developers have also moved into the affordable housing segment and have slashed their prices by 20 to 30 per cent to generate liquidity.
Analysts opined that with the price slash their apartments sold of at a higher pace then expected, liquidity restraints have started to ease out with debt roll-overs, the stock market is rallying and bank credits have improved. Now the developers are planning more such affordable homes for the home seekers. According to the market research, Unitech, the country’s second largest developer has sold 2,500 units in three to four affordable housing projects in the last one-and-a-half months. Observing this trend, the developer has strategize to go aggressive with new launches because they are quite confident to sell them of quickly too.
DLF is planning to launch 8 to 9 million sq ft of city-centre projects southern India including Chennai, Kochi and in Delhi and Gurgaon. The Group is also planning to start affordable housing projects of around 5 to 8 million sq ft in NCR and southern cities. DLF has experienced good response for their projects wherever they have launched during this year.
Developers feel that if the project is good and price is affordable then it will sell irrespective of market conditions. The real estate sector has started making good sales after the price cuts. The new projects designed and launched are certainly attractive for customers. According to the developers, the price cuts were inevitable as it’s clearly a buyers’ market. That’s a reason why a lot of marketing efforts were put into selling space. And these efforts were worth it as the companies are selling more flats as compared to the year 2008.
Most of the developers have cut their home prices by roughly 25 per cent and have also reduced ticket sizes. Presently, the average size of an apartment is between 700 to 800 sq ft against 1,500 sq ft apartment that were sold in the past years.
Analysts have observed that by slashing the prices the real estate developers have taken a huge hit on their profit margins. Affordable housing projects have a profit margin of 25 to 30 per cent versus 50 to 70 per cent in premium housing projects. And the developers are happy with the 20 to 25 per cent profit margins now since liquidity is the bigger issue than profits today.
Apart from increased sales results of the affordable homes, their other factors also that had led to launch more of the kind. Another reason is that the sale generation has given developers a relief from immediate debt payments.
Most of the premier developers have rolled over their liabilities by 12 to 18 months after the Reserve Bank of India has given a green signal to commercial banks for restructuring of their debts.
The recent surge in the stock market has also helped developers to revive from the recession struck market. The surge in the stock market has opened new doors of opportunities for many of them and developers can get in more institutional investors to reduce debt and invest in new designed projects. Now smaller developers have started looking for qualified institutional placement after the premier developers raised a huge chunk of money through them.
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