Thrusday, November 03, 2011

Realtors seek new small towns

HUNTING FOR GROWTH Volumes, margins high
              As property valuations in smaller cities improve and those in metros face downward pressure, big developers are trying to find a foothold in smaller markets.
              Realtors such as Shapoorji Pallonji, DLF, Indiabulls, Omaxe and Ansal Properties among several others have been going aggressive in the smaller cities.
              For instance, Jignesh Joshi, 30, who owns a start-up in Mumbai, shelled out 1 crore for an apartment in Vadodara -and noone even raised an eyebrow.
              “Only about two months after I bought the property, prices seem to have jumped up by 5% to 7%. The apartment has amenities at par with those in Mumbai or NCR apartments,“ said Joshi, who bought the 2,000 sq ft apartment in August.
              In another building just half a kilometer away in the city, a Mumbai-based investor who had bought an apartment for 65 lakh in 2008, says is now valued at 1.3 crore.
              “Smaller cities like Vadodara, Mysore and Mangalore, where prices increased as much as inflation earlier, are now seeing very healthy growth, about 100% price appreciation in the past two to three years in some cases,“ said Pranay Vakil, chairman, Knight Frank (India), real estate consultant. “While the growth in these cities is linked to development, many expatriates and residents of the city working in metros are also investing in such properties.“
              While DLF saw tremendous response for its project in Indore, Ansal Properties has been entering cities such as Lucknow, Agra, Panipat, Jodhpur and Kundli. Shahpoorji Pallonji, a Mumbai-based company, recently entered the Vadodara real estate market.
              “Volumes have been falling in NCR and there is a pressure on price, but we do not want to slash them as our costs remain high,“ said the chairman of the BSE listed firm that has projects in smaller cities of Punjab, Madhya Pradesh and Haryana.
              “But in tier-II and tier-III cities, the volumes and margins remain high, about 70% of our unit sales in second quarter happened in smaller cities."
              So would prices in smaller cities too go the Mumbai NCR way? “Unlikely,“ said Vakil, “The price rise in smaller cities is more like a step than a graph.
              Prices will stabilise once they reach a certain level, for some years."