Bangalore to become more affordable

19 Feb 2009, ET Bureau

BANGALORE: Will India’s realty giant DLF lead a wave of residential price correction in Bangalore’s upscale apartment market? The company, which Home loan rates may drop shortly

DLF virtually single-handedly created Gurgaon, has slashed its rates for an upcoming project in Bangalore’s Bannerghatta Road by a whopping 32%. In a move that surprised many, the rates have been cut to Rs 1,850 per sq ft, a price last quoted in 2000.

DLF, which relaunched the project in a new avtaar Westend Heights, originally announced it in October 2008 at a ticket price of Rs 2,750 per sq feet. Realty trackers say the fresh offering is clearly a response to slowdown. The company had earlier proposed the project to be a mix of row houses and apartments.

Now, it is offering 1,980 units over 27.5 acres. Clearly, the positioning has changed to budget apartments. The price is even more surprising because local realty majors Prestige and Nitesh Estates have upcoming residential projects in the vicinity sporting Rs 3,200-3,500 per sq ft price tag.

“It is a bold move by any realty player,” a realty consulting firm head, who did not wish to be named, said. Another consultant said that DLF brings in a large inventory of projects into the market. “Such a pricing will set benchmarks,” he added.

“We are mainly passing on the benefits of efficiency derived from new plans and input cost reductions which have kicked post the earlier launch. Although, we received reasonable response to our earlier launch, the current market calls for greater thrust in terms of value proposition and our current launch is an effort in that direction,” a DLF spokesperson said. Customers, who had booked the flats earlier, will now be given the first choice of booking under the new plans.

Currently, this is DLF’s only active residential project down south after the company rolled back plans in Kochi and is going slow on a proposed plan in Chennai. The unit price of these apartments range between Rs 31 lakh (1,085 sq ft) and Rs 45.5 lakh (1,850 sq ft). Essentially, the per sq ft rate is lower for a larger apartment area.

The new price war, initiated by DLF, is expected to make others like Nitesh, Prestige and Sobha, who have projects in the vicinity, to follow suit. Even when DLF initially launched this project, its pricing was a tad lower (sub-Rs 3,000 per sq ft) than its rivals in the segment.

But the promoter of a Bangalore realty firm said: “DLF may decide to go ahead with the project and book a loss, in a bid to get some liquidity into their system. But I think the rates they are quoting now are not feasible, and we will not follow suit.”

DLF’s fresh move, coupled with a tepid market and piling up inventory, may compel realty players to come out of their denial mode and take steps to make pricing affordable. So far, realtors have relied on marketing gimmicks like freebies and non-pre EMI schemes to lower the burden on buyers. However, DLF’s pricing continues to mystify rivals and realty trackers.