MUMBAI: What’s in a name? The Bard would never have guessed just how wrong he got it. Consumers today swear by brand names for everything, from breakfast cereal and baby diapers to washing machines and watches. Late last year, a report by property consultant Knight Frank revealed the growing trend towards branded properties.
According to the report, while the prime city markets around the world have seen prices rise by an average of 15.5% in the past three years “outperforming more mainstream markets” they were, in turn, outperformed by branded residences.
The latter can also help developers increase their profits by about 30%. So, what’s in it for home buyers? Should they consider this option and readily pay a premium for such property or is it just a marketing gimmick that can be safely ignored? Here are the things you should consider before making a decision.
What’s a branded house?
As the name suggests, a branded house is a property where the developer associates his company’s name with the project. This is true for developers, who have, over the decades, made a name for themselves through the quality of their construction. It’s due to this credibility that they are able to charge a premium for their branded properties.
Niranjan Hiranandani, managing director of Hiranadani Group of Companies, says that a reputed developer typically includes several amenities and features that the small-time ones ignore. “For instance, the former would install superior quality flooring while constructing a house. The switches and electrical appliances, plumbing and bathroom fittings, etc, would be of premium quality. For these additional amenities and prime quality, he would have to incur certain costs, which will be passed on to home buyers,” he explains. So you are not shelling out extra for a brand name alone.
What’s the premium you pay?
According to Anuj Puri, chairman and country head, Jones Lang LaSalle India, a buyer of a branded luxury home can expect to pay at least a 25% premium over and above the luxury residential rates for a given location. “However, the premium will depend on the brand’s international stature, though there is currently no scale of reference when it comes to real estate. You can expect to pay for the privilege, but also get what you paid for,” he adds.
What are the advantages?
The most obvious one would be the high return on investment guaranteed by branded properties. According to Hiranandani, such projects include perks like a recreation centre, swimming pool, open parks, security systems and good parking facilities for tenants, all of which push up the resale value of flats. Some developers even offer warranties on their properties for a certain time frame.
So, for instance, if any of the fittings break down within the warranty period, these would be replaced free of cost. “Add to this the guarantee that promises will be met on time, a fact proved over a period of 30-35 years. This will be missing in properties constructed by unknown developers,” says Hiranandani.
You can also expect better upkeep in such properties. “These housing societies have better security, proper maintenance of gardens and other housekeeping services, often outsourced to professional agencies. The rule of thumb is that the better a property is maintained, the higher the appreciation it is likely to see,” says Ganesh Vasudevan, chief executive officer of Chennai based IndiaProperty. com.
Lastly, as mentioned earlier, you can bank on the quality of construction, down to the smallest detail. “So, the customers who are looking to directly move into the apartment don’t have to put in the additional effort of redoing the place,” he adds.
Even if you are looking for a property purely for rental purposes, you can’t go wrong with a branded one. “Rental income for such properties is always 15-20% higher than that in a regular project due to the amenities on offer. Besides, the good upkeep means that the time taken to rent it out will be much less,” says Vasudevan.
Where is the trend headed?
With the highest demand in the residential property sector stemming from the low- to mid-income segment, one can’t expect branded homes to sell better than the generic offerings from less known developers. “However, if we look at the luxury home segment in the metros, there is certainly a healthy appetite for branded homes among the high net worth individuals,” says Puri.
According to him, luxury aspirations in India’s larger cities are obviously geared towards brands, which is why Swiss watches and designer jeans sell well even if their high-quality, indigenous counterparts don’t. “A lot obviously depends on the value additions that the brand brings to the project,” he says.
Points to ponder
Before you rush to invest in a branded home, here are the things you should go focus on.