With investment in real estate yielding good returns, apartments are being promoted as a profitable investment option by real estate groups.
Many of the apartments are furnished, but rarely used before changing hands after years of purchase.
Representatives of several builders admitted that the occupancy levels in apartments were as low as 25-30 per cent. A spokesman of Confederation of Real Estate Developers’ Association of India (Credai) said the occupancy levels varied depending on the builder as well as the location.
Only about 30 per cent of the apartments were occupied by owners because for most buyers it was a means of investment, said Habish. K., senior manager (sales and marketing), Hoysala Projects Private Limited.
But escalation in prices is mainly on account of skyrocketing land prices and not because of the individual investment in apartments.
Low-cost housing projects were possible only in city outskirts where the land could be available at cheaper rates, he said.
The maximum input cost in any project comes from land. A decade ago, the situation was different when land was a minor factor in pricing. The cost of land has pushed up the prices of apartments from about Rs.100 per sq. ft. 15 years ago to Rs.3,000-Rs.3,500 per sq. ft. today.
Subrahmanyam, vice-president of real estate venture Superstone Properties, said 70 per cent of buyers of apartment complexes in Kerala were NRIs. Among them are people who plan to return to the State after a few years. The apartments remain locked for a long time before being utilised. There are others who want to sell the units at a premium later.
“The high land cost prevents builders from going for budget apartments. The land, labour and tax rates remain the same for luxury as well as budget homes,”he said.
K. Vijayachandran, head of Cochin Centre for Policy Initiatives, a non-government organisation, said ineffective implementation of land use policy had given rise to the trend. He wondered as to whether the ever increasing land prices would generate a real estate bubble that could burst as had happened in the West, spurring economic slowdown.
There should be restrictions on holding idle landed property. A land use policy framework is required for every local body as per the Land Use Act. But the rule is never enforced, resulting in large-scale misuse of land. “Rational use of land is essential in Kerala which is facing land scarcity. Detailed town planning should be made applicable in cities which will prevent the large-scale misuse of land and speculation in real estate. Large holdings should be heavily taxed,” he said.
K.J. Sohan, chairman of Town Planning Standing Committee of Kochi Corporation, said the development model adopted by most builders was not suitable for Kochi. The population growth within the corporation limits during a decade, as per census, was 5.5 per cent whereas the real estate growth was around 10 per cent. “It is a reflection of bad economics and poor social justice. The focus should be on constructing low-cost shelters for people who do not have high purchasing power”, he said.
