Anshul Jain, Chief Executive, DTZ India talks to Lakshmi Krupa about how affordable housing can be made viable and whether we can expect prices to drop as unsold units pile up
Until a while ago, investors were buying properties with the idea that they could offload it in six months. It was a speculator’s game. But over the last year things have changed. Units are not rolling over so easily and real estate prices have remained stable. So investors are stuck with projects and are not able to purchase any more. When end-user activity reduces, the market comes to a standstill.
Will the market see a correction in prices then?
Prices have dropped only once in the last 15 years, in the mid-90s. So, the odds seem against that. What I expect is for prices to remain flat. The traditional increase will continue – in the sense that the per sq. ft cost of a project when you invest in it at the beginning will be lower than the price of the project when it is closer to getting ready. That’s normal. But overall, looking at the last 12 months’ figures, prices are set to remain stable. Salaries have been dull and increments have been few. These are critical to the pricing issue.
How is the industry coping?
In Delhi, for instance, it is possible for buyers to negotiate with builders and reduce the per sq. ft cost to a much lesser price than the going market rate. There are also cases where discounts are offered with bulk bookings where 50 people belonging to one company get together and negotiate prices. Developers are also offering a lot of freebies.
Despite many policy changes, builders are unable to deliver affordable projects. Why?
For an affordable project to be successful, it needs to be quickly completed and this can be done only when there is public-private partnership. It requires developers to construct and sell a flat at Rs.1,200–1,300 per sq. ft. These days, land is very expensive. To solve the problem, the government should take care of the land and outsource the building to a developer. It's also important to keep speculators away from such projects. There are cases when people buy two affordable homes next to each other and turn it into one big luxury home.
What is your advice for investors and home buyers?
If you are an investor, go in with a long-term plan, say three to five years. Don’t buy anything with the idea of spinning it off in six months. The choice of developer is very important. Check his track record in the local market. You can easily find out a company’s financial health online. Don’t get swayed by showcase flats and agents' hype. If you are the end-user and plan to stay in the apartment you are buying, then your options are more.
What are DTZ’s plans for the Indian market?
We are about nine years old in the Indian market, but we come with wide experience in the US, UK etc. We have been known for our project management and construction management skills. In South India, we have about 10 million sq. ft of work including residential and commercial projects. We have an engineering background and that has also helped us. Besides predicting markets, we are also taking up facilities management and building management systems. We hope to make a strong difference in the sector because we have first-hand experience and will not outsource this to anyone else.