Economic Recession Drives Developers to Mull over Affordable Pricing

Bangalore: Real estate developers are looking at affordable pricing due to economic recession. To increase sales, developers have to price their inventories properly, which in turn will suit home buyers requirement, says a study conducted by Jones Lang LaSalle and CII, reports Vidyalaxmi of ET Bureau.

According to the report "Projects which were launched in the price band of more than 7,500 per sq ft took longer to sell. Prices of projects launched in 2009 in the under 2,000 per sq ft price band escalated rapidly in 2010, thereby negatively affecting their absorption."

However, buyers of the projects under the price quote of 3000 per square feet or below are ‘Need Based Buyers,’ their capacity to buy a house reduced during the period of increasing interest rates.

"Similarly the segments of buyers in the price band of 7,500 per sq ft or more were predominantly 'Aspirational Buyers' or second home buyers who could choose to postpone their buying decision," reports Economic Times.

Therefore, projects under price quote of 3000-7000 per square feet witnessed lower percentage of unsold stock compared to the other two categories.  

During the year 2011, the price appreciation for residential property slowed down, but, the scenario is not the same for all markets. The report stated that "Prevailing capital values are well beyond the previous peak witnessed in third quarter of 2008 in Mumbai, Bangalore, Chennai and Kolkata. In NCR-Delhi, capital values are expected to surpass the previous peak by end-2012 and residential property rates are likely to continue their upward trajectory in select cities, although at a slower pace than in 2010."

Certain locations that have witnessed price rise at a fast space, will not only witness struggle to any further price rises, but will also have to deal with some downward pressure. The report stated "Projects in suburban markets which are already oversupplied with a homogeneous mix of residential products will face difficulties in increasing prices," reports Economic Times.