Why Developers Launch Projects Even In Slow Market Conditions

Kishor Pate

Top developers have a strategy of launching new projects even in a slow market, and there is sound logic behind this. There is always demand for residential projects at convenient locations and with good amenities. If the pricing of the project is also in line with what buyers are willing to pay, there is no reason why sales will not be generated. 

Market research confirms that sales are taking place, even if it is at a slower rate. These sales are happening for the right kinds of projects – it is projects in the wrong locations, with fewer or the wrong kinds of amenities and with the wrong pricing that are finding no takers.

As a matter of fact, prices of projects have been showing a gradually decreasing trend over the last one year. Developers are offering lucrative deals and discounts on their projects, thereby helping to create end-user markets rather than just pandering to investors, as had been the trend in the past.

Overall, it can be said that the residential real estate industry has reached its lowest trough both with regard to prices and sales. The only change that can now come to the market is a positive one, and the graph will begin rising upward from here onward, not least of all because the Indian economy has strengthened and will continue to gain in strength going forward.

The government is also extending more support to the real estate industry than ever before, and the cumulative results of these favourable circumstances will definitely be seen from this year onward. With India makes strong strides on the path of development, interest in real estate investment is going to increase steeply over the coming years.

Today, cities still accommodate only about 40% of the population in India. But with increasing economic growth, more and more people will shift to urban areas, spawning more and more demand for homes in all price ranges. Developers who continue to launch their projects even while the market is slow are investing in this future.

If we take a closer look at the unsold inventory of residential real estate in India today, the numbers are undoubtedly large. Nevertheless, there is no shortage of new launches scheduled. In fact, we will see even more residential supply hitting the market in 2016 than we saw in 2015. 

It is pertinent to note that most of the unsold projects in India today are the result of deficient planning on the part of their developers. They have chosen flawed or hopelessly futuristic locations where people are not interested in moving, and/or have included high-end amenities that drive up the overall cost beyond what buyers are willing to pay.

As we embark into 2016, we will see that the new residential launches are more aligned with the existing demand, both in terms of pricing and what they have to offer.

About the Author

Kishor Pate, Chairman & Managing Director of Amit Enterprises Housing Ltd. is the driving force behind one of the most successful real estate development firms in Pune and beyond. Apart from its signature luxury homes towers and premium gated townships, AEHL has also launched highly successful affordable housing projects like Astonia Classic and Colori in Undri and the Mediterranean-style township Astonia Royale in Ambegaon.