The Hindu : Tamil Nadu / Chennai News : Apartment sales looks down

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Sunday, Jun 29, 2008
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Tamil Nadu

Tamil Nadu - Chennai

Apartment sales looks down

A. Srivathsan

Smaller developers are finding it difficult to hold on to unsold units for long
It is time for the Chennai developers to rethink their approach, feels consultant

CHENNAI: The city’s residential property market is at its ebb. Only a few apartment projects have been launched in the last few months. Though all the apartments so far completed have been sold, new projects and those under construction face relatively poor response.

Smaller developers are finding it difficult to hold on to unsold units for longer period. Their profit margins are in the order of 20 per cent and any delay affects the economics of their projects. As a result, they are willing to reduce the profit margins and move on to the next project, says M.K. Sundaram, Chairman, Builders Association of India, Southern Centre.

However, bigger developers, some of who had bought land parcels at a very low price years ago, are not willing to reduce prices. With deep margins, as much as 40 per cent, they can afford to hold on.

Those who had opted for joint venture projects have managed well, while the worst hit are those who had bought land at higher prices.

One of the well-known developers told The Hindu that many from outside the city had bought large properties on Rajiv Gandhi Salai (formerly Old Mahabalipuram Road) to develop them later or speculate on land prices. But they now want to sell and there are not many takers. Days when developers would chase properties have gone and now landowners’ approach the developers and prices at few a places have come down, he added.

Mr. Sundaram attributes increased land and input cost and home loan rates for the present situation.

Parkash Challa, President, Confederation of Real Estate Developer’s Associations of India (CREDAI), Tamil Nadu, says the demand for apartments is still high and will continue to remain so.

“The cost of construction has increased and there is a need to increase the price of apartments to make the project viable”.

There is less scope for prices to come down, he thinks.

A well-known real estate consultant in Chennai says it is time for the Chennai developers to rethink their approach. He advocates less luxurious and smaller size units to make houses affordable.

“The Delhi model of development with executive clubs, tall multi-storeyed buildings and luxury specification will not suit Chennai. It is time for the builders to opt for Rs.1200 sq.ft construction cost model,” he said.

As developers wait and watch the market, woes of homebuyers are increasing. With the home loans becoming dearer and hefty house prices, the numbers of people who own houses are shrinking. If the developers further increase the apartment price, the situation would aggravate, says C.H. Gopinath Rao, former national president, Institution of Valuers.

He recommends that land hoarding by builders needs to be discouraged and hefty vacant land tax imposed.

The developers must be compelled to build on the large land tracts they have acquired.

Housing is a social issue and if necessary the State has to intervene to regulate the market.

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