Meltdown effect: High-end apartments bite the dust too

MUMBAI: When South Mumbai-based Orbit Constructions launched the 27-storey Orbit Arya on Napeansea road, the question on everyone’s mind was whether these luxury apartments would sell, given the rising interest rates on home loans and commercial lending.

In the past 18 months, Orbit has sold only 7 of the 14 flats. The company recorded its last sale (at Rs 62,000 a sq ft) some four months ago.

Similar is the case at the super luxury residential building Oberoi Skyz launched by Oberoi Constructions at the erstwhile Glaxo plot at Worli. Having sold off 30 of the 60 flats, the company claims to have stopped sales for the past few months. The last sale at Rs25,000 a sq ft was also recorded quite some time ago.

“The fluctuating stock market  has affected the sentiments of the luxury apartment market, thereby  slowing down sales,” admitted Pujit Aggarwal, managing director of Orbit Constructions.

Aggarwal’s admission thus envelopes the luxury apartment market, which seemed immune to the slowdown in the property market in the rest of the city. Property rates in the suburbs have dropped by 30 to 40%.

Usually, say property consultants, the luxury market remains unperturbed by rising interest rates. “But the US subprime crisis along with the slide in India’s stock market is starting to affect the realty market. With the result, investors are thinking twice about buying property. The fluctuating market has affected investors like diamond merchants and stock brokers who may now want to repay their losses by selling their property at reduced profit margin,’’ said Dinesh Sheth, treasurer of Real Estate Agents Association of India.  

Echoing Sheth’s view, Ashok Gulati of Sun Realty said, “Though the property rates are unaffected, the market sentiment is affected. People are hesitant to purchase a flat as they are also looking for a good choice of flat which is currently unavailable. The uncertainty in the stock market has also sparked off fears of a liquidity crunch but I believe this may only be for a limited period.’’

“Strong purchasing power means the rich will go ahead and buy anyway,” said Pankaj Renjhen, managing director (city) with Jones Lang Lasalle Meghraj, global property consultants, admitting that the number of buyers in absolute terms could have come down as the investors’ holding power will have reduced due to the global financial scenario.

``Developers are no longer selling their projects overnight. But apart from the time it takes to sell a large project, this could also mean better realisation for the developer if prices rise in the interim,’’ a consultant added.

Speculation has it that builders are shoring up property values by calculated leaks of a few freak, big-ticket deals. Last November, Citibank sold a flat in NCPA Apartments on the Marine Drive waterfront for Rs 34 crore, that is at a rate of over Rs 97,000 a sq ft. The deal created a buzz in the property market and helped jack up prices further in south Mumbai. Many of these purchases involve those in the realty business themselves.

Sameer Gehlaut, executive director of Indiabulls, is believed to have pulled off a purchase of an apartment in developer Suresh Raheja’s famed Chattan Bungalow project on Malabar Hill for a price close to Rs1 lakh a sq. ft.

Two years earlier, another Indiabulls director, Gagan Banga, bought a flat in Cuffe Parade’s Maker Towers B from Citibank for Rs7.2 crore, a rate of Rs 37,500 a sq. ft. In January 2006, he created a new price point. Now, Gehlaut’s Chattan Bungalow purchase has pushed the price point further for 2008.

FIRST LUXURY APARTMENT BUILDING

Some time in the late ‘70s or early ‘80s a building called Kanchenjunga, designed by the architect Charles Correa, came up on Peddar Road, a giant, off-white rectangular box, with large perforations coloured a violent red on the inside.

The perforations were the balconies of duplex flats. For a long time, no one occupied those flats. The building had been erected on a disputed site. No matter, the building became a star of Mumbai’s skyline.