While India’s residential market continues to reel under a slowdown, real estate developers have increasingly been exploring innovative avenues to attract potential buyers.
“Unable to sell expensive homes in a sluggish market, builders across India are making smaller apartments without lowering the price per square foot and compromising the quality of the products,” according to a report by real estate consultancy, JLL India.
“Around the country, builders are emulating the famous sachet marketing strategy adopted by FMCG companies in the late 1990s,” said Anuj Puri, Chairman and Country Head, JLL India.
A report by consultancy Knight Frank India had estimated that the current unsold inventory in the top eight Indian cities is at 7 lakh units and would take three years to exhaust.
In the last five years, average apartment sizes have been falling across all major cities in India. Mumbai, which already had smaller and compact apartment sizes compared to other cities, saw the highest fall of 26.4 per cent in the past five years. The JLL report said Chennai continues to deliver the largest unit sizes among Tier-II cities and Bengaluru in Tier-I cities.
The fall in average apartment size across all top seven cities is a clear indication that developers intend to make houses affordable for buyers by reducing average apartment size instead of reducing the capital values. “While property prices are not purely a product of developer’s discretion, the decision to alter apartment sizes as per the needs and spending power of buyers is definitely within their ambit,” Mr. Puri said.
In order to enjoy the luxury of bigger homes with good amenities, urban buyers prefer to buy homes in peripheral areas of the cities, from where the concept of second homes is emerging on the outskirts of cities. Buyers are increasingly opting for homes that are closer to work-places in order to reduce commute times. As these locations are expensive compared to suburbs, buyers may be able to afford smaller units, which is more than acceptable, the report said.
