Luxury Housing More Lucrative for Realty Developers

Bangalore: Developers in Delhi-NCR are more interested to launch luxury residential projects than building affordable housing due to increasing costs of construction.

Prominent developers like Unitech, DLF, Tata Housing, Supertech and Oxame, to name a few had initially planned to come up with affordable housing to attract potential home buyers are now trying to make some changes in their plan due to low profit margins, reports Anuradha Shukla of Business Today.

According to industry estimates, the home buyers are seeking houses between the price bracket of 25 lakh and 40 lakh. Moreover, the costs of construction have headed north since August 2010, as per developers.

"The rise in the price of building materials will escalate the overall cost of production, which in turn will be passed on to the buyers," said R K Arora, Chairman and Managing Director, Supertech. "Therefore it is imperative that the authorities intervene and addresses the issue at the earliest so that further escalation of prices is averted and the losses minimized," added Arora.

"The increase in the price of building materials has a direct impact on property prices," said Ashwani Prakash, Executive Director, Paramount Group. "We are trying our best to absorb the impact of the prices within the prevailing property rates instead of passing the burden on to the buyers," said Prakash.

On this context, Anuj Chaudhary, Director, Panchsheel Buildtech stated that "The prices of construction materials have been a concern for a while and we have been trying to minimize the impact by lowering the profit margins and offering flexible payment options among others."

Besides, maximum developers opt to develop projects under premium category focusing on the profit margins, as per contractors.

With the increase in input costs, the profit margin for affordable housing has declined by 15 percent where as “In the luxury segment this is between 35-50 per cent," according to an inside source.