The Hindu : Karnataka / Bangalore News : For builders, small is now beautiful

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Wednesday, Aug 19, 2009
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Karnataka

Karnataka - Bangalore

For builders, small is now beautiful

Sharath S. Srivatsa

With real estate prices more realistic, transactions now taking place are by genuine buyers

Developers are now venturing into new housing projects
They are looking at 1 BHK segment as a feasible opportunity

Revival: Industry experts feel that the coming months could see a number of projects, especially the affordable homes, take off.

BANGALORE: Real estate developers, who were down in the dumps following recession since August last, have been smiling for the last two months.

Aided by revival measures announced by the Government and the banks lowering interest rates, developers are now venturing into new housing projects, albeit cautiously, as several companies have received enquiries for new units while some have reported sales in the last two to three months.

After a price correction ranging from 15 to 20 per cent, the prevailing rates offered by the developers are believed to be the lowest in the recent years, and industry experts feel that the coming months could see a number of projects, especially the affordable homes, take off. “This is also the best time for customers to buy homes, as prices could go up again in near future,” a market analyst with a leading developer said.

“The mindset is much better, especially after the revival of stock market. While the State Government has reduced stamp duty, the Union Government has abolished service tax and the banks have reduced interest, which have all helped revive the construction activity,” A. Balakrishna Hedge, president of Confederation of Real Estate Developer’s Associations of India-Karnataka, said.

He said: “In the coming months, we might see increased sales since recession effect is receding and people who had postponed purchases in October last are firming up their plans.”

In fact, the recently concluded CREDAI Realty Expo saw as many as 36 housing units sold on the spot besides a large number of enquiries in the new projects that were announced. “Most companies have reported improvement in sales by 60 per cent in the second quarter. About 10 new housing projects were launched during the expo, which got a good response,” said Kamal Sagar of CREDAI.

As far as the commercial space is concerned, Mr. Sagar said that there is a demand for 3 million sq ft in Class A facilities, mostly from the MNCs while about thrice that number is available in Bangalore.

If in the past, single bed room apartments (1 BHKs) were an exception, developers are now looking at this segment as a feasible opportunity to attract customers. Several projects are being modified to fit in 1 BHKs.

Recession

The recession has also seen the sizes of homes shrinking to bring down the cost in the affordable home segment, which may now range from Rs. 15 lakh to Rs. 25 lakh in well-developed areas. Before the recession set in, 1 BHKs were confined mostly to projects developed by Category C developers whereas even Category A developers are also pitching in into affordable home segment now.

“As the demand for space increases along with the need for affordable houses, 1 BHK apartments and small homes will become a norm in the future,” said a senior executive of a leading developer. Acknowledging that developers had not addressed the need of this segment so far, Mr. Hegde said: “Being at the bottom of the pyramid, this segment offers a huge number. With announcement of 1 per cent waiver on the rate of interest for home loans below Rs. 20 lakh, we see a good potential here.”

Nearly 70 per cent of the housing needs in the country, now put at 23 million units, fall in the sub-Rs. 20 lakh range, he added.

Even as the industry experts feel that the real estate sector is witnessing a revival, it may take some time for speculators to enter the fray. While the end-users or the genuine buyers, who have deferred purchase might be the first entrants in the revived market, speculators, who normally invest without fundamentals, would watch their moves till the market improves.

“Speculation buying has come down drastically. Transactions in real estate that are taking place now are by genuine buyers and in these cases prices have been realistic,” Builders Association of India Member M. Ramesh said.

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