Rising interest rates makes it difficult for them to sell 1-2BHK flats to cash-strapped middle class.
With builders struggling to sell 1-2 BHK flats during this slowdown in real estate sector, they are launching only high-end luxury housing projects for its guaranteed high return.
Real estate experts said the rising interest rates, slowdown in the European market and an unpredictable share market has discouraged people from investing in 1-2 BHK flats.
“These factors and uncertainties in the market are discouraging prospective buyers from buying homes. During festivals like Dussehra and Diwali, people are not coming forward to property. So, developers are giving priority to high-end luxury housing projects to survive in the market as the risk is less and return guarantee is high,” an expert said.
Some of the high-end projects include-Hill Crest by Akurti developer at Andheri, Nexzone by Marathon developer at Panvel, Rodas by Hiranandani Group at Thane, Kalpataru Hills by Kalpataru Developer at Panvel and Lodha’s residential project at Wadala.
Pranay Vakil, chairman at Knight Frank, said the response to property market is not as good as expected. “If people want to buy a house, then they should see the ready possession project. In high-end projects, developers have been successful in selling large number of houses. Here, developer puts less effort and gets more profit margin,” said Vakil, adding that it will be difficult to say the sell is down. “We should wait and watch for the official figures before coming to a final conclusion”.
Pankaj Kapoor, MD of real estate research firm Liases and Foras, said the prices are moving in a particular direction only.
“The private equity players are more in luxury projects. Therefore, the developers are not in a hurry to dispose the flats to recover the cost. They have got more time to sell their projects. In normal housing projects, flat has to be sold out in three years after its commencement. In luxury projects, the return is high and guaranteed. That motives the developers to start high-end projects. If the prices are continuously increasing, the developers are tent to start luxury projects because of premium prices. The terrace can be sold in 3 and 4 BHK flats only. It is not possible in one room kitchen and one BHK flat,” he said.
Paras Gundecha, president of Maharashtra Chamber of Housing Industry (MCHI), admitted that the developers are launching only high-end projects because of high land cost. “It is very difficult and not feasible for developers to make one and two BHK and sell them. If the government is serious about affordable houses, they should increase the city FSI to at least 4. Otherwise, affordable housing will remain only dream,” he said.
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