Realty firms think small to target buyers on a budget

Bengaluru/Mumbai: Homes across Indian cities are becoming more compact as developers are trimming apartment sizes and even resizing in some cases to target buyers with smaller budgets.

After launching its Greenfield project in east Bengaluru around two years ago, Shriram Properties Pvt. Ltd recently repositioned the project as O2 Homes, launching fresh stock with apartment sizes smaller by 10% and unit prices lower by 6-10%. “Sales had become dull after the first year of the project launch. The repositioning and tweak in unit sizes worked well. We sold around 450 units in recent months,” managing director M. Murali said.

In the 200-acre mixed-use Urbana township in Bengaluru, the Ozone Group is set to launch smaller homes priced at Rs25-40 lakh for one- and two-bedroom units. So far, the developer sold homes in the project’s earlier phases at an average ticket size of Rs70 lakh.

“Prime is a new community in Urbana based on what customers clearly want today—small-sized homes. As developers, we have no choice but to build what will bring in cash flow. It is a somewhat myopic view because by the time the project delivery happens in a few years, affordability of buyers would improve,” Ozone Group chief executive Srinivasan Gopalan said.

Affordability is a key factor in home-buying decisions today and realty firms are desperate to bring more buyers into the fray. As unsold inventory levels peak following a five-year-long slowdown, home sizes are becoming more customer-centric across price segments, including the luxury space.

“The need of smaller flats is huge and compact homes are a possibility at all prices. Space efficiency is key and compact two-bedroom and 1.5 bedroom homes are in demand,” said Mumbai-based architect Hafeez Contractor.

After nearly 14 years, the Marathon Group has returned with one bedroom-hall-kitchen (BHK) in its project ‘Eminence’ in suburban Mumbai’s Mulund with one BHK homes of 450 sq. ft livable area and 650 sq. ft 2BHKs starting at an all-inclusive Rs95 lakh.

Graphic: Naveen Kumar Saini/Mint

Graphic: Naveen Kumar Saini/Mint

Marathon managing director Mayur R. Shah said the company decided on the size and price, given that existing projects in the micro-market offer much larger homes.

“The impact of demonetisation and other regulatory changes have led to new projects being repositioned as per market needs. The Mulund project addresses both affordability and aspirational elements,” Shah said.

To be sure, property prices have corrected in the last few years. Resizing homes to smaller specifications means reducing ticket size or unit price by making them affordable without further dropping per sq. ft rate.

Sanghvi Realty has gone back to the drawing board to redesign and re-size two projects in south Mumbai, to be launched later this year.

One BHKs have been reduced to 400-450 sq. ft from 500-550 sq. ft, two BHKs to 650-750 sq. ft from 800 and three BHK homes are now 1000 sq. ft from 1100-1150 sq. ft.

“Today, buyers think in terms of their budget, not area of the apartment. So we have to come up products that fit that budget. We have changed all the plans and redesigned as per market demand, without compromising on the facilities,” said director Ramesh Sanghvi.

A lot of the resizing is not by choice, but by compulsion in the new Real Estate Regulatory Authority (RERA) regime.

“It was necessary for people to go back to the drawing board because 52% unsold inventory is not a happy situation, especially where you have to complete the project on time,” said Gautam Chatterjee, chairperson, Maharashtra RERA.

“…If you have to sell your flats, you got to have flats where there are takers. If there are no takers and if your unsold inventories remain, there will be no liquidity and then how will you complete the projects. A developer has no choice but to be professional and calculative in trying to bring out the right mix of products for which there will be takers,” Chatterjee said.

Not just smaller homes, it is easier to sell reasonably sized projects too, said Santhosh Kumar, vice-chairman of Anarock Property Consultants.

“One reason why unsold units got so huge is because builders never made homes that suit a buyers’s budget. There is clear demand for smaller units between Rs45 lakh-Rs1.5 crore today,” he said.

In Gurugram, however, developers are unable to do smaller homes because building regulations don’t allow these due to density concerns.

“Demand is for affordable, small ticket units but in Haryana, because of density issues, we have to build large units. It’s a problem,” said Parveen Jain, chairman, Tulip Infratech.livemint