Tapering growth lowers luxury home sales
When the economy is down and spending is cut, this is the segment that’s hit first
Jul 11, 2013
Source : The Economic Times

 

MUMBAI: The richer middle class too is feeling the impact of the slowdown and isn’t buying homes like before, badly impacting sales of luxury homes.

In Mumbai, sales of luxury homes – anything above Rs 5 crore – in the last three quarters have dropped 35% while Gurgaon has witnessed a 40% drop in sales of apartments above Rs 3 crore. In Bangalore, sales are down at least 20% in the Rs 2.5 crore and above segment, says real estate research firm Liases Foras.

“When the economy is down and spending is cut, this is the segment that’s hit first,” says Lalit Kumar Jain, chairman of the Confederation of Real Estate Developers Associations of India.

Property brokers and advisory firms say home sales in this segment have tapered in the last few months. “It’s now getting increasingly difficult to sell luxury homes across major markets like Gurgaon, Mumbai and Bangalore,” says Mudassir Zaidi, regional director for global property consultant Knight Frank.

Many businessmen, who usually invest their surplus funds in real estate, have seen their cash flows getting tightened because of a slowing economy and the rupee touching 60. “These buyers, who made a majority of buyers in the city, are today out of the market. In fact, even end-users in this segment are today sitting on the fence,” says Abhay Khemka of Khemka Investments & Properties, a realty brokerage firm in Gurgaon.

Areas like Golf Course Road Extension and the Gurgaon-Faridabad Road have seen a number of luxury projects being launched in the past year. “It is now taking longer to sell apartments here,” says Khemka.

In Gurgaon, many investors who are stuck with apartments they bought earlier are no longer buying fresh ones.

There are some investors who are offering discounts of up to 20% to sell their apartments in under-construction projects compared to what a developer is offering in the same project. On the Golf Course Road Extension, for instance, an investor is selling an apartment for Rs 3.5 crore while the developer is selling a similar apartment in the same project for Rs 4.5 crore.

Prices of apartments in the luxury segment have risen too much in Mumbai, says Pankaj Kapoor, managing director of Liases Foras.

“Luxury housing is driven by increase in prices and developers launched projects in recent months without realising that the market for this segment of apartments is very small,” he says.

In Mumbai, areas like Mahalaxmi, Lower Parel, Worli, Lokhandwala, Juhu and Bandra saw a number of such projects being launched. While the supply of homes in this segment in Mumbai has increased by over 30% in the past year, sales have dropped because of a slowing economy and high prices, says Kapoor.

Bangalore is another market where supply has overtaken demand when it comes to the luxury-housing segment. According to Liases Foras, Bangalore has seen supply in this segment increase by 35% in the last three quarters, and this along with high prices and a slowdown in the IT sector has brought down sales. A number of luxury projects have been launched in areas like Bellary Road, Devanhalli, Outer Ring Road, Doddaballapur in north Bangalore and Whitefield.

Bangalore-based developer Puravankara group, for instance, has all approvals in place for a  project in Bangalore where apartments would be in the Rs 2.5 crore and above range, but the company has decided not to launch the project, for now.

“We have consciously taken a call to launch at a more suitable time as we see a supply-demand mismatch in this segment currently,” says Jack Bastian Nazareth, group chief executive officer at Puravankara group.

Brokers in Bangalore say local demand for apartments in this segment has dropped in recent times.

Latest Realty News

Only 903 housing societies in Mumbai apply for land transfer
Jul 11, 2013
MUMBAI: The deemed conveyance campaign, from last December to June 30, has received a very poor response.
High-end realty deal: A shanty in Dharavi fetching a price of over Rs 1 crore
Jul 11, 2013
MUMBAI: A shanty in Dharavi is fetching a price of over Rs 1 crore, and real estate prices in Asia's second-largest slum cluster are beating those in posh central Mumbai areas like Lower Parel.
Key cities across India witness supply of over 20 mn sqft of office space in H1, 2013
Jul 10, 2013
MUMBAI: The prime office space segment across key cities in India witnessed a supply infusion of more than 20 million sqft in the first six months of 2013.
Donald Trump to launch first real estate project in Pune
Jul 10, 2013
PUNE: America's real estate business tycoon and celebrity Donald Trump has announced his company's first Indian project, a 22-storied residential twin towers in Pune having 44 luxurious single-floor condominiums.
Mumbai office market to cross 100 million sq ft mark in Q4 2014: Jones Lang LaSalle
Jul 10, 2013
MUMBAI: Despite sluggish sentiment in the overall realty sector, Mumbai's commercial real estate stock is likely to cross 100 million sq ft mark by the fourth quarter of 2014, consultancy firm Jones Lang LaSalle said.
Finally, a civic property list for Pune
Jul 09, 2013
PUNE: Ten years after it started collecting the data, the Pune Municipal Corporation (PMC) has finally enlisted civic properties paving the way for asset valuation and bringing transparency in lease contracts.
Pune's 'queen of the suburbs'
Jul 09, 2013
PUNE: The western side of Pune is advantageously connected to the expressway which allows easy and speedy access to Mumbai. It also has the major Information Technology (IT) Parks of Hinjewadi, Baner and Aundh in the neighbourhood, while also offering great connectivity to the industrial pockets of Chakan, Pimpri Chinchwad Municipal Corporation and Talegaon. Apart from these economic drivers, Pune's western side is high on serenity and natural beauty, which obviously contributes to its popularit
Decoding the real estate Bill
Jul 09, 2013
MUMBAI: The Bill suggests 10 per cent of the project cost as penalty for first-time offenders. Repeat offenders could get a jail term of up to three years.
Pune emerges as the hub of the luxury housing segments
Jul 09, 2013
PUNE: Like most other cities in India that have seen exponential growth over the last few decades, Pune too had times when luxury living was defined by large standalone homes. Space was not a constraint, land prices were low and houses were generally built by the owners of the plots. Despite their size and impressive interiors and overall grandeur, these homes were obviously limited in their luxurious aspects in terms of the technical finesse in these homes.
BMC rakes in Rs 1500 crore from premium of FSI
Jul 09, 2013
MUMBAI: The Brihanmumbai Municipal Corporation (BMC) has earned a major windfall, thanks to Mumbai’s builders. The BMC earned Rs 1,500 crore in little over a year by charging builders a premium for utilizing compensatory floor space index (FSI). FSI defines how much can be built on a plot.

Latest Realty News Of State

Realty Talk's