The present trend suggests property rate have gone in for a correction. Brix Research on measures to be taken by authorities to reduce prices and make houses affordable to the aam admi
Developers and development authorities are struggling to find ways and means for reducing cost of houses in order to sell them at lower prices. Lalit Srivastav, CEO Noida and Greater Noida Authority, in an exclusive interview to Brix Research, explains: "We realize that builders cannot control input costs. Therefore, at the policy level we have increased the Floor Area Ratio (FAR) from 1.5 to 2.75 in Noida and Greater Noida. This allows developers to build more on the same piece of land. In addition, we have doubled the density allowed for residential development. This allows builders to make smaller unit sizes of about 1,000 sq ft each, so that they become more affordable for buyers."
A high-powered task force on affordable housing headed by HDFC Chairman, Deepak Parekh offered a similar solution to Kumari Sailja, minister of state (independent charge) for Urban Employment and Poverty Alleviation. To ensure land availability for affordable housing, the panel recommended an upward revision in the FAR/FSI across cities, commensurate with investment in infrastructure. It also suggested imposition of an impact fee on those benefiting from additional FAR/FSI, to fund housing for low and middle-income groups.
Demand for house in the mid-segment has changed and a buyer who earlier wanted a 1,800 sq ft apartment is currently looking at a 900 sq ft apartment. His actual need is for a 2-BHK with all in house amenities. It is a common habit to flaunt one's home as a status symbol. Since cost cannot come down, the area per unit has come down.
This is a trend that Gaurav Bhalla of Vatika Group too endorses. Today, with the Vatika City project on Sohna Road in Gurgaon ready for possession, Bhalla finds a huge number of buyers who are also end users. "This time round, we have been able to attract large number of end users because of ready stock," explains Bhalla.
Gaurav Bhalla further says: "Handing over possession of existing projects with requisite lifestyle features actually helps to bring in end users into newer projects. Today's buyers are in the 35-40 years age bracket - mid-career executives who are buying their first homes. They have been paying rents for some time and their aspirations are refined and not overly stylized. Safety and security is a prime consideration. The difference between a buyer in the frenzied boom time and now is that a end user today realizes what contributes to lifestyle and what is not very important."
The price per sq ft has gone down immensely with scaled-down specifications. Change in the quality of tiles and bathroom fittings have worked wonders. Pradeep Jain, CMD Parsvnath Developers, comments: "From here on, new projects will be launched at an affordable cost.
To do this we will scale down specifications and some facilities, to increase profit margins. Italian marbles have been replaced by tiles or stone, which brings down prices from Rs 300 to Rs 50 per sq ft. Earlier a 3-BHK of 2,000-2,200 sq ft apartment had 3 bathrooms and a Puja ghar/store. Today, a 3-BHK would be between 1,250-1,300 sq ft with 2 bathrooms and no store."
Taxes paid to different government agencies by developers also tend to increase the prices of houses, says Kumar Gera, Chairman, CREDAI. "Today about Rs 700 per sq ft goes in various local, state and central taxes. If government is serious about reducing prices, this taxation structure should be reviewed in the affordable segment."
To give a fillip to affordable housing, the Deepak Parekh Committee recommended that stamp duty rate in all states in the affordable segment be reduced to 2%. This will ensure a buyer's transaction cost in purchasing an apartment comes down. For affordable housing to become a reality, both the government and the private sector need to work together. Tax cuts and incentives from the government need to be passed on to the buyer with profit margins being scaled down. Developers and builders must now look at the economy of volumes to bring in profits.
Courtesy:- Times Property dtd:- 31st jan. 2009
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