The Hindu Business Line : Builders likely to lower prices on Naredco directive

New Delhi, Nov. 21 National Real Estate Development Council (Naredco) on Friday asked its member companies — that includes the likes of DLF, Unitech, Ansal API, and Parsvnath — to cut rates on housing projects to combat the prolonged slump in demand. Naredco has urged developers to bring down prices in three slabs — 1-5 per cent ‘discount’ on existing projects to customers paying on time, 5-10 per cent reduction on future projects and 10-15 per cent for affordable housing projects ranging between Rs 3-20 lakh.

“We have just sent out e-mails, and developers such as Assotech and Ansal API have already communicated approval for the same,” the Naredco President, Mr Rohtas Goel, told reporters here.

Affordability

The move augurs well for home buyers, but it needs to be seen as to what extent these ‘missives’ actually translate into a lower outgo for consumers, over the coming months. While Unitech spokesperson said that the company will consider Naredco’s communication, others such as Sobha Developers said they would discuss the issue with the management and take a decision. A Parsvnath official said that reducing rates on existing projects may prove to be difficult, the company would look at affordability in future projects, by either re-orienting specifications or reducing the ticket size. A DLF spokesperson said the company has already reduced prices and its mid-income housing projects at Rs 2,200-2,800 per sq ft were already affordable.

‘Revive demand’

Earlier this week, the Finance Minister, Mr P. Chidambaram, had asked the Indian industry to cut prices to revive demand. Following this, Confederation of Real Estate Developers’ Association of India on Wednesday asked its members to cut property prices to stimulate demand.

“We respect the concerns of the Finance Minister and we are ready for price cuts. On existing projects the prices have already fallen by 20-40 per cent across the country,” Mr Goel, who is also the Chairman and Managing Director of Omaxe, said.

Ongoing Projects

On existing projects, there is no cushion on account of higher steel and cement prices prevailing over the last one year. “If you look at the price at which the developers sell, apart from the cost of construction, land and administrative costs, the builder is left with a 10 per cent profit. Developers do not have the cushion to reduce prices,” he said.

Mr Goel said the National Affordable Housing and Infrastructure would launch five projects in the range of Rs 2.99-9.99 lakh on January 26, 2008. These projects will come up at Indore, Raipur, Bhopal and Allahabad.

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