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« Foreign Investors Eyeing Badly Hit Small and Mid Size Indian Developers | Home | Unitech raises $325 m by Selling Fresh Shares to Institutional Investors »

Luxury Real Estate Projects Fail to Get Buyers

Developers are finding it difficult to push high-end apartments, villas and stand-alone bungalows; even enquiries have dropped by over 60 per cent demand for luxury and high-end residential projects, which were the business drivers for developers during the real estate boom, have taken a beating, due to the economic slump that has hit the sector. Luxury homes come as apartments or villas with golf courses, swimming pools, Jacuzzis, terrace gardens and personal plunge pools. Such houses are priced at a minimum of Rs 2-3 crore, and could go up to as high as Rs 10-15 crore, depending on the location. They generated healthy profit margins for developers when the real estate sector was booming. But after the slowdown, developers are finding it increasingly difficult to push the luxury lifestyle units. Moreover, enquiries for premium homes have plummeted by more than 60 per cent.

“Industries across sectors have witnessed a slowdown. The real estate sector is no exception and there has been a cascading negative impact on customers’ sentiment, forcing them to either defer investment or reduce the investment bracket, given the present liquidity positions. This has, in turn, led to a paradigm shift in customers’ attitude – they prefer basic amenities to luxury,” says Pradeep Jain, chairman of Delhi-based Parsvnath Developers. Sector watchers say the overheated real estate bubble actually burst because of speculation by developers over the demand for luxury, premium products. Says Avneet Soni, adviser to chairman and managing director of another Delhi-based developer Omaxe, “Investors, who were cashing out ahead of a possible softening, have exited the market. The segment is now seeing only genuine buyers.”

Some feel that though the numbers have come down, demand is still there. “The need or want to upgrade is still there, but market sentiment in this segment is weak. Consumers are still waiting for prices to drop in this bracket,” says Kumar Gera, president of Confederation of Real Estate Developers Association of India (Credai). After the slump, real estate prices have corrected by an average of 25-30 per cent across segments. Demand for housing in India is expected to touch 7 million by 2012-2013. The affordable housing segment is expected to account for 80 per cent of this demand.

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