There are enough people looking to buy a home – at least 1,034 wannabe buyers trawl Indiaproperty.com at any given time. But searches are not getting converted into purchases because location, price and social infrastructure seldom converge for today’s homebuyer. Ganesh Vasudevan, Chief Executive Officer, India Property Online Pvt. Ltd, says where there is demand, there are not enough homes.

Do you see an uptick in the demand for luxury homes in Chennai? How does this trend compare with other metros?

In terms of absolute numbers, luxury homes constitute a small portion. But yes, there is demand for well-appointed homes in Chennai, no matter how highly they are priced. Similar to how BMW, AUDI and Mercedes Benz are selling at a brisk pace despite an overall slump in sales in the automobile sector, luxury homes are still comfortably in demand. From a national perspective, however, Rs 15 crore is not an eye-popping sum for a home. In Mumbai, it is not really remarkable. There is a growing number of NRIs coming back to India, may be for their children’s education, to reconnect with their roots, or to live with their parents. This has spawned a crop of luxury homes, and some are right at the centre of the city. The trend in the South started in Bangalore and Hyderabad, and now is in Chennai. But uptake of luxury homes does not represent a true picture of the demand.

In which range of prices do you see the majority of homebuying?

Between Rs 50 and 60 lakh – about 65 per cent of sales fall in that segment. Unfortunately, people have to go the suburbs for a Rs 50-lakh home and the infrastructure is still in the works. On Old Mahabalipuram Road, the roads have been laid, but pipe water from reservoirs does not reach every area, and the sewage system is not proper. Not many cinemas or quality restaurants. Similar is the case if you go down the Grand Southern Trunk Road or near Sriperambudur. Even in Bangalore, acres beyond the Electronic City are being sold, but the social infrastructure there is not much to speak of. In the National Capital Region, real estate is speculative.

Do you see the investment-for-profit culture taking off in Chennai as well?

For the last three years, we are seeing Chennai real estate being considered from an investor’s perspective. The city’s obvious advantages are robust demand, safe to dwell, and there is a definite upside from where prices stand today. Roughly, about 15 per cent of the transactions are speculative in nature. They come in at pre-launch, wait for development, and at the time of delivery offload it in the secondary market. It happens particularly on OMR. The sweet spot is Rs 40-50 lakh.

How are the developers protecting their margins in such times of rising investor interest, high inflation and growing demand for homes?

They are building smaller homes to guard profit margins. A three-bedroom-hall-kitchen flat used to measure 1,800-1,900 sq. ft in 2006. Now, we are talking 1,200 sq. ft or even smaller. Through this, builders are making sure the cost per sq. ft does not move closer to the yield per sq, ft, which has moved up in tandem with the continuous rise in land prices. The other sea-change is what goes into a luxury homes nowadays. Earlier, luxury meant a gated community with a gym and a swimming pool. Now, it’s bespoke bath fittings and furniture, concierge services, swanky spas, twin car parks, plunge pool in each apartment, and private elevators. We get all the works for prices from Rs 5 crore to as high as Rs 24 crore. As for the high pricing, it’s as aspirational as utility-serving and they are getting sold at a decent pace. However, developers are stuck with unsold homes in Rs 70-80 lakh segment.

Should developers not look at discounting homes to cut inventory?

They should, But all I see are bundled offers such as more parking space or an apartment with modular kitchen. Some developers have taken leaps of faith by building homes in areas where you have walk miles to reach a school, or a hospital. The rise in land prices following the announcement of a second airport near Sriperambudur is an example. Within a year of two, these homes will sell, of course. Homebuyers should buy now, ahead of a possible price rise due to compliance requirements imposed on the developers by the Real Estate Bill 2013. Builders are expected to meet quality standards in construction, deliver in time, and get approval from a State-level body before beginning construction.

The new rules mean more costs for developers, which could be passed on to buyers.

bharani.v@thehindu.co.in

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