Builders blink, first price cuts are here

After stubbornly holding on to high prices for four years in the face of sluggish sales, a crippling liquidity crunch and rising cost of capital, Mumbai's real estate industry has just blinked. At least three of Mumbai top builders have either cut prices by as much as Rs 2250 to Rs 5,000 or introduced flexible pricing within a single project, or launched innovative schemes where buyers stump up large sums to book properties even before the project enters construction stage. All this means only one thing - the longdue correction in real estate prices is here. And while many builders may not be announcing price cuts up front yet, it is no secret that they all are now willing to negotiate with buyers. Shree Naman Group and RNA Corp have slashed prices of their projects in Elphinstone and Goregaon respectively and Lodha Group, in a move that is sure to start a big churning in the industry, is offering discounts of up to Rs 5000 per sq feet to those who book their apartments between January 18 and 28 at their high-profile Worli project Codename Blue Moon. RNA Corp was selling two and three bedroom flats at its Exotica project in Goregaon at Rs 11,750 per sq ft and a Rs 100 floor rise till recently. The prices have now been slashed to Rs 9,950 per sq ft with floor rise at Rs 50. The complex has four wings of 50 floors each. The building has two basements, eleven levels of podium parking, a common amenities deck and 36 residential floors. Naman Midtown, a commercial property at Elphinstone, recently introduced flexi-pricing for office spaces. Not only are the new rates substantially lower than what was being offered a month back, there are bigger bargains to be grabbed on different floors if one is not too fixated on a particular view. In the A wing, Naman Midtown has office spaces available for Rs 20,750 per sq ft between 1st and fifth floor. For the next block, from 6th floor to the 10th, the new rate is Rs 21,750 and for the third block, 15th floor above the rate rises to Rs 22,500 sq ft. All these prices are Rs 2,500 to Rs 4,250 sq ft lower than Naman's last offer. But the most aggressive pricing strategy has come from Lodha with an IPO-like scheme for its Blue Moon project. At a time when properties in Worli are being pegged at Rs 29,000 per sq ft, Lodha is offering two, three and four bedroom apartments in two towers at Rs 23,991 per sq ft. Around 700 apartments are on the block. Buyers will have to pay an initial sum of Rs 9 lakh to book an apartment. The booking will open on January 18 and close on January 28. RKarthik, CMO of Lodha Group, said that idea was to introduce a product “which offers luxury at near-suburban prices.” The company has announced the prices when the project is launched in the open market will be “at least 25% higher than the pre-launch rates.” Manoj John, vice-president, corporate planning and strategy at RNA Corp, and officials at Shree Naman Group declined to comment officially for this report. A survey conducted by Knight Frank, areal estate consultancy firm, in June last year had revealed that Mumbai real estate market had an unsold inventory of 80,000 units worth approximately Rs 1,050 billion. The report had also stated that the global economic crisis of 2008 affected the market adversely as prices dipped in some micro-markets at the premium end of the market and rebounded, scaling to their 2007 highs in the subsequent two years. But in 2012, the Mumbai market stagnated as buyers largely kept away expecting a drop in prices in the near future. The buyers' patience has paid. The Mumbai market is now opening for good bargains. Lalit Kumar Jain, president of Confederation of Real Estate Developers Association of India, said the liquidity crunch is forcing builders to reduce prices and clear inventory. He expects more builders to follow Naman, RNA and Lodha's example. His own construction company, Kumar Builders, is also dropping prices wherever possible, he said. Source (Yogesh Sadhwani, Mumbai Mirror, Jan 16, 2013) : "Builders blink, first price cuts are here."