English in name, Infrastructure is a shame

My earlier post on the topic of real estate evoked some response from the aggrieved group via email and it showed more insight into the murky world of real estate. This post is also on a similar topic. 

Real estate developers have a penchant for giving fancy names to their new projects. These fancy names may not be in tune with reality. The developers use such creative names to lure buyers and justify the premium pricing. Majority of print ads for new projects show random foreigner images which have no connection to the type of residents which the development would eventually house. The only reason from the developer's viewpoint could be to make the project aspirational. Names like Belvedere, Windermere, Manchester Grand (Coimbatore), Hyde Park and Bougainvilla shows how creative developers are. With more developments offering lifestyle facilities, one wonders how the maintenance of such facilities would be carried out few years down the line. Some of the thoughts mentioned above are echoed by Aruna 'Vishy' Anand (yes, she has a new blog!) as she has discovered most of these first hand by virtue of purchasing an apartment in the much hyped IT Corridor / OMR.

the property was named Sherwood Gardens or Windmere with swans .... in the lake (there is a lake with swans in a 10 km radius ), Greyshott , Bella Tuscany ( in the middle of perungudi town panchyat!) etc etc

They are all described as the ideal habitat for the global resident. A place where you can put up your legs, watch your children grow. dip yourself in the jacuzzi hob nob with equal minded gullible people !!

We narrowed on one Park Rozalia . One World .One place. The ad featured a child running around the place. The kid looked Danish , swedish ... and looked so happy . The features read like a country club. (Link)

Although the Anands purchased an 'English' home in Pallikaranai (an area which was and is still used as a dumping ground by Chennai Corporation), they also bought another property which was more centrally located, and decided to use the City apartment as it is close to their parents home. 

The recent meltdown has brought the focus back to affordable homes without the bells and whistles. Most developers are shying away from direct price discounts as they feel that this might enrage existing buyers (who are awaiting completion of the apartment). Hence, developers are doling out freebies like stamp duty waiver, free parking space etc. When it starts pinching more, expect developers to get more realistic. 

DLF Faces An Acid Test In Chennai

DLF is a recent entrant to the Chennai property scene and is facing quite a few headwinds. Sometime ago, there was news that DLF collected about Rs. 5 lakhs Earnest Money Deposit (EMD) from interested buyers even before the project managed to get all the necessary approvals. As the property prices continue their downtrend, buyers who were among the early birds to sign up are pushing DLF to drop the price to be in tune with the falling market. Although DLF has acceded to their request, the buyers feel that the discounts are not sufficient enough. DLF has very little choice other than to give in to the dissenting buyers. If DLF doesn’t cut the price more aggressively, it risks losing willing buyers who wouldn’t mind foregoing the EMD (as worst case) as their potential losses might even surpass that of Rs. 5 lakhs. DLF on its part has assured buyers that it would refund EMD if required as per the terms of the agreement.

Credit is becoming increasingly scarce for corporates and more so for the property sector. The project is about 50% booked and I wouldn’t be surprised if some of the original buyers back out if prices are not slashed. DLF might need more bookings and upfront / progress payment to fund working capital. I feel that the project delays might also be quite disconcerting to buyers as they need to wait longer to get their dream home. Without enough bookings, DLF might not be in position to continue construction at the required pace. Instead of being more aggressive on the pricing front, DLF seems to be concentrating on rewarding agents by offering them more commissions. I really doubt if such incentives can lure the ultimate buyers. If DLF has long-term plans of being a reputed player in the Chennai property market, it needs to make serious amends to appease existing and prospective customers. 

Beemers for home buyers

Jaypee Sun Court, an ultra-luxury residential project near Noida is being promoted in an unique way. Buyers will get a BMW 320i car with the purchase of each apartment. Each apartment is priced around Rs. 3 Crores and the estimated price of a BMW 320i is Rs. 30 lakhs. 

One would think that a direct cash discount (of say 10%) would matter more to buyers than a free car. Furthermore, most buyers of the multi crore apartments would already own some top-end car model. From a developer’s perspective, offering a car creates much more noise than offering a cash discount.

As the property market absorbs global shocks, expect developers to offload unsold apartments at steep discounts. Some of the developers might also offer to absorb charges like stamp duties and registration fees. We have seen such a situation back in 2002 and I’m sure it’s going to be repeated all over again.