Mumbai: The product has to be priced appropriately to suit consumers is one of the prime lessons that recession taught real estate developers, says a study by Jones Lang LaSalle and CII. “Projects which were launched in the price band of more than Rs 7,500 per sq ft took longer to sell.
Prices of projects launched in 2009 in the under Rs 2,000 per sq ft price band escalated rapidly in 2010, thereby negatively affecting their absorption,” the report states. Since buyers of projects in the price band of Rs 3,000 per sq ft or below are price sensitive ‘Need Based Buyers’, their ability to afford houses diminished during the times of hardening interest rates.
“Similarly the segments of buyers in the price band of Rs 7,500 per sq ft or more were predominantly ‘Aspirational Buyers’ or second home buyers who could choose to postpone their buying decision,” the report states.
Hence projects in the price band of Rs 3,000-7,500 per sq ft have a relatively lower percentage of unsold stock as compared to the other two categories.
Residential property appreciation has slowed down in 2011, however, not in all markets. “Prevailing capital values are well beyond the previous peak witnessed in third quarter of 2008 in Mumbai, Bangalore, Chennai and Kolkata.
In NCR-Delhi, capital values are expected to surpass the previous peak by end-2012 and residential property rates are likely to continue their upward trajectory in select cities, although at a slower pace than in 2010,” the report states. A good amount of this appreciation will come from the increase in construction costs and the increased costs of capital.
Certain locations that have witnessed rapid increments in price, will not only witness resistance to any further price rises, but also face some downward pressure. “Projects in suburban markets which are already oversupplied with a homogeneous mix of residential products will face difficulties in increasing prices,” the report states. Source>>>