The rising interest rates may impact demand for homes from those who are looking at it as an investment option. But this would not hit the demand from the end-user segment, which is the preferred segment for the project developers, according to Mr N. Ravichandran, Chairman, True Value Homes India Pvt Ltd (TVH), Chennai.

He said he has no immediate plans to take the company, which has launched an Rs 800-crore integrated township project in Coimbatore, public in the immediate future.

Singapore-China model

Speaking at a news conference here on on Sunday, he said in countries such as Singapore and China, while for the first home purchase for a family the government offers some concession, for second or third home buying for investment purposes, the interest rates are raised and the governments also impose stringent norms. It would be better if in India such a policy is considered because the investment buying creates a lot of fluctuation in rates.

Asked whether he was suggesting that India should follow the Singapore or China model, Mr Ravichandran remarked “that is better, you know.” Because of market demand, the builders tend to raise the rates as it happens in Mumbai or Delhi and this trend may replicate in other centres as well, which would affect the end-users.

He said he would welcome the suggestion of replicating the Singapore model since the second or third homes were bought by a family for investment reasons and not for end-user purposes.

End-user priority

He said when investors (speculators) try to offload the properties in an over-heated market it pushes up the prices further, denying the end-users an opportunity to purchase properties. He felt there was a need for control in the system and as a company, ‘an end-user was always better' as a buyer since this would control the fluctuation in market prices.

Mr K. Suresh, Chief Financial Officer, TVH, said that investors making speculative purchases would have already factored in the interest costs, income-tax relief etc before making their decision. He said compared to 2007 prices, in 2010-11 there could be 10-15 per cent increase in price. Home purchase was a necessity and he did not think the rise in interest rates on home loans would dent the appetite for homes among the end-users, though it could impact speculative demand.

Vista heights

Explaining the features of the Coimbatore ‘Vista Heights' project, Mr Ravichandran said the project, to be executed in two phases, would have about 800 apartments, ranging from 500 sq.ft 1-BHK apartments to 2,500-4,000 sq.ft 4-BHK apartments. The 2-BHK apartments would be about 1000 sq.ft and 3-BHK would be 1,200-2,000 sq.ft in size. There would also be villas and mall and commercial buildings, apart from facilities such as joggers' track, spa, gym, children's play ground and an eight-screen multiplex theatre with 1,600 seat capacity.

The total township project area was 18 lakh sq.ft and the investment planned in the integrated township project coming up on Tiruchi road opposite to Perks School here was about Rs 800 crore spread over five years. While for the first phase the price was fixed at Rs 2800/sq.ft, for the second phase, the rate has been revised to Rs 3100/sq.ft. The first phase of about 400 units would be ready in 21 months.

He said the maintenance cost of about Rs 1.50/sq. ft. a month would be collected on the basis of the size of apartments and not on the basis of usage of facilities. There was growing awareness about lifestyle products and the affordability was increasing as evidenced by the fact that even in a far away place like Siliguri, a 700-acre township was coming up, designed by the same architect who designed TVH's new Coimbatore township project.

Mature market

Asked about the nature of the Coimbatore market compared to other tier II cities, Mr Ravichandran said the Coimbatore market was the ‘most mature market' and demand here was driven by the end-users as proved in the booking for the first phase of TVH's new project where 90 per cent of the bookings were by the end-users. He said TVH would also hunt for more locations to start new projects in Coimbatore in 3-6 months. As the project is spread over 4-5 years, the company would have to provide for 10-15 per cent fluctuation in cost. The company would be going in for CRISIL rating and green building certification for the ‘Vista Heights' project.

Public issue

Questioned whether he was going for any public issue as TVH has 7 on going projects and 11 upcoming projects in Chennai, Coimbatore and Tiruchi, the TVH Chairman said, “right now we don't have the idea.” He would have to consider the business plans in the next three or four years.

For the realty sector, going public was a tough choice as people always expect growth. The real estate industry may become more organised in two or three years and the government also was looking at implementing stringent norms. May be after that, he would like to take a call on the issue.

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