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This article was first published 10 years ago

What Mumbai developers are doing to pep up realty markets

Last updated on: February 14, 2014 13:35 IST


Photographs: Reuters Raghavendra Kamath in Mumbai

Estimates show 25 such prelaunches in the country’s commercial capital in the past six months.

The big ones by the Runwal group, Kalpataru and Lodha have been lapped by buyers, thanks to lower size of apartments and pricing, say consultants.

Normally, 20-30 per cent of a project is sold during a prelaunch and buyers need to pay 30 per cent of the price as advance.

“The prelaunch market is reviving in Mumbai. Developers are playing safe by avoiding the risk of unsold inventory.

“Even before getting all approvals, they are locking in buyers,” says Ashutosh Limaye, head of research, Jones Lang LaSalle India.

A latest report by global consultant Knight Frank says 130,000 of the city’s 290,00 under-construction residential properties (45 per cent) are unsold because of weak demand and high prices.

. . .

What Mumbai developers are doing to pep up realty markets

Image: A Mumbai Monorail passes through a residential area in the eastern suburbs of Mumbai.
Photographs: Danish Siddiqui/Reuters

Limaye says if developers expect approvals in 12 months, they factor in all financial costs while giving discounts.

In a market weak in terms of launches and volumes due to high prices, some prelaunches have done well.

Realty developer Runwal group recently prelaunched its Runwal Forest at Rs 9,900 a square foot in the Kanjur Marg (west) area of Mumbai against the market price of Rs 12,000-15,000 a square foot.

The company sold about 400 units in two weeks.

The major draw for the project is said to be its lower ticket-size and attractive pricing.

The project had a configuration of 1.5 BHK (bedroom-hall-kitchen) of 725-square foot bedroom apartment, two bedrooms of 1,025-square foot, among others, with prices starting from Rs 73 lakh (Rs 7.3 million).

. . .

What Mumbai developers are doing to pep up realty markets


Photographs: Reuters

“Normally, developers in that area do not do smaller-sized apartments.

“The Rs 70-80 lakh (Rs 7-8-million) apartments must have appealed to the buyers,” says Raja Kaushal, managing director of Gatere, an alliance member of BNP Paribas Real Estate.

Kaushal says those who invest only in real estate favour these buys, given that they can make 20 per cent gains in the first six months of launch (or 40 per cent on an annual basis) against 15-18 per cent they make from commercial papers such as non-convertible debentures.

“They see two arbitrage opportunities during the prelaunch and (actual) launch, and launch and completion,” Kaushal points out.

. . .

 

What Mumbai developers are doing to pep up realty markets


Photographs: Reuters

About a month ago, Kalpataru sold 400-odd apartments during prelaunch at its Thane project, Kalpataru Sunrise, within a few days of opening.

Here too, consultants say, the biggest draw was small ticket sizes and competitive pricing.

The apartments were priced at Rs 7,500 a square foot against the market price of Rs 9,000-10,000.

A two-bedroom apartment of 801 square foot was priced at Rs 60.08 lakh (Rs 6 million) and another two-BHK apartment of 813 square foot was priced at Rs 60.98 lakh (Rs 6.09 million).

Similarly, the Lodha group sold off 2,500 units during the prelaunch of its latest project Palava in Dombivali area.

One bedroom apartments of 729 square foot were priced at Rs 34.19 lakh (Rs 3.41 million) or Rs 4,689 a square foot.

. . .

What Mumbai developers are doing to pep up realty markets


Photographs: Reuters

PRIMER ON PRELAUNCH

  • Prelaunches happen ahead of a formal launch, before they get all approvals
  • Properties during pre launch sell at 20 per cent lower than prevailing prices
  • Developers increase prices by 20 per cent between launch and prelaunch
  • Buyers need to pay 30 per cent of apartment price as an advance
  • 20-30 per cent of project is sold during prelaunch
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