Bottom Line: In its fixation for âlocation, location & locationâ the Indian developers have ignored the basic need of research in launching new projects.
âLocation, Location & Locationâ has been the tried and tested format of success in the Indian real estate. It has been the best calling card for the developers. Many even assumed that if the developer has got a piece of land in any of the highly desirable locations, that itself is enough to sell the project.
However, this market optimism led to the downfall of many of the developers. The slowdown just forced them to introspect as to why some other developer in the same market is selling successfully at higher price point while their project is heading nowhere.
The answer to this lies in the single word â research, or rather lack of it. Take the case of a builder who has abandoned housing project in one of the most desirable locations of South Delhi. The said developer had borrowed heavily to buy an 800-sq yard park-facing corner plot in West End for Rs 90 crore three years ago. He was forced to abandon the apartment project and put the plot on the block after failing to find takers.
Analysts point out say the same builder would have sold the apartments even at the drawing board stage had he read the pulse of the market right.
Anish Shah, Director, Amal Realtors, however, believes that in certain locations it is true that land competence itself is enough to sell. He cites the example of Mumbai where the biggest difficulty is to how to get the land. He therefore asserts that anyone claiming to have defined the demand and then launching a project in such locations wonât be true.
âOn the outskirts that may sound good but otherwise in Mumbai any developer is ready to pick up any land. With that land then the project is planned keeping in mind what kind of demand will come, whether it will be residential or commercial or IT. But on the outskirts, MMR region or Thane or on the western side beyond Virar, you will have to see what sort of demand will come,â Shah.
Sandeep Ahuja, CEO, Richa Realty is candid on this to admit that the developers have been carried away with land competence. According to him, it has been happening like this for several decades and because of this the developers have landed to this kind of a situation. The developers have not focused much on the research. However, he believes here onwards this is not going to work.
âIt may sound fine that in Mumbai you just buy land and make whatever, it will work but it is not going to work. In the same micro market of Mumbai one developer with better product is able to sell out more and reach out to far number of people than a developer who has not focused on the research. The developers have been ignoring it but I think now they wonât be able to ignore it,â says Ahuja.
Many of the developers continue to think that research on what kind of product you should offer is something that is different. But they feel in a developed city what comes first is to identify the land that is the key determinant.
Citing the case of Noida an analyst points out that demand and supply mismatch today is largely because the greed sets in to make the best of location advantage. He points out thatÂ the sizes which are made available in Noida are really large. The buyer in that market is coming because he is not been able to afford anywhere else. In the new areas buyers donât go out of choice and this is a global phenomenon. Someone goes to Noida because he is not being able to buy it in Gurgaon or Delhi.
The analyst maintains that had the developers in Noida been sizing it right with the help of research on buyersâ needs they would have been able to sell it far more. There is no denying that the developersâ view on land competence added with the perceived demand have got them carried away to launch thirty to forty storied apartments worth crore and that has added to the problem of demand & supply mismatch and inventory overhang.
By: Ravi Sinha