Over the last decade, VGN Developers has evolved from selling plotted layouts to developing residential projects in the suburbs to building high-end projects in the city. The transition has been in line with the trends in the residential market. VGN believes there is a huge demand for high-end homes in the city, which is a healthy and robust market in which prices have not crashed in three decades. Pratish Devadoss, Managing Director, shares some of the company’s plans and views on the market.
The company has been increasingly aggressive in recent years with project launches and targeting high-end segments…
In 2005, VGN got into developing residential projects and has, since then, handed over 4-5 million sq. ft of residential space; 3-4 million sq. ft is under construction and about 2.5 million sq. ft of development is in the pipeline. The company has rapidly scaled up its projects and focussed on large-scale, value-added developments. It was around that time that banks too started concentrating on disbursing home loans. Layout development is only a question of getting approvals. Now the business is more operation intensive.
What are the market segments you target?
VGN is primarily focussed on mid-segment projects offering apartments priced between Rs 40 lakh and about Rs 80 lakh. The company had huge land banks in the suburbs in parcels of 30 to 80 acres. Project prices are driven primarily on land cost and location, and VGN was positioned strongly on these grounds.
VGN is now offering products spanning the entire range of the market segment. Sales are active in the Rs 40-65 lakh segment and in projects that are over Rs 2 crore an apartment.
But sales appear to have taken a hit in recent months. Developers acknowledge they are worried about the slowdown…
Yes, housing sales has been bad in the last few months but in recent weeks there seems to be some pick-up. Normally, VGN sells around 120 apartments a month but it was down by about one-third during the lows. The numbers are now picking up to over a 100 a month. But we are not able to specify the reason for the drop or the recovery. Maybe the mood is changing, the prospect of a change in government at the Centre, food inflation being down… it could be anything.
With respect to your recent land acquisitions within the city, what are the company’s plans? Is the market condition a worry?
The company is getting into high-end projects. These give it a lot of visibility. VGN has pumped in about Rs 310 crore in Guindy and Rs 220 crore in Nungambakkam in two land parcels.
The Nungambakkam project will be an iconic development with 72 apartments and lavish features such as a business lounge, cafeteria, infinity pool, three-level automated car park. The final price is yet to be decided but will be around Rs 30,000 a sq ft for apartments of over 3,500 sq. ft. The project is designed by German architects, Hadi Teherani. In December, VGN will launch a 1,700-apartment project in Guindy priced at about Rs 1.5 crore an apartment.
Chennai is a robust market and in the last three decades the market has not crashed.
There is some scepticism in the market as people believe there could be an oversupply of high-end apartments in the coming years…
Chennai easily needs over 500 apartments on this scale. We have over 25 serious buyers keen on the Nungambakkam project. Buyers from major towns in Tamil Nadu have evinced interest — from Coimbatore, Erode, and also from North India.
Why do we not see developers bringing down prices as is happening in other cities?
That only causes instability. We cannot afford to cut prices. If I launch a project of 100 apartments, we offer early bird advantage to the buyers initially and subsequently prices can only go up. If we cut prices, the early buyers will feel cheated.
Is this the time to invest?
Now is as good a time as any. Prices have stagnated but liquidity is bound to return in a few months and that will be followed with increasing prices.