Realty Firms Consider Joint Development For Construction Projects

Real estate firms will enter into joint development for construction projects by selling land parcels to other builders, given the drop in sales of apartments and inflationary trends.

Pankaj Jaju, head-real estate practice, Enam Securities told FE, “Metros and Tier II towns having a huge pipeline of projects have witnessed a 60% drop in sales of apartments in the last six months.” Selling land parcels to other builders for joint development will enable land owners to invest in buying more land bank and increasing the supply of properties, he opined.

Rohit Gera, executive director, Gera Developers aired similar views. “The real estate market in Pune has witnessed a 60% drop in sales. If inflationary trends continue till December 2008, land value will undergo a price correction of about 30% by March – April 2008,” he said.

However, this will not impact consumers as developers will not charge a premium from them. Instead, as Gera revealed, “Large, medium and small developers have already started offering land to us for joint development. We are, in fact, waiting for price discounts at which we can borrow land from them for constructing their projects.”

Industry experts believe that real estate prices in Navi Mumbai and Bandra Kurla Complex (BKC) are expected to shoot up further by about 10-15% within the next six months if developers are not able to complete their projects on time.

The scene is not too different in Bangalore and Chennai, where the real estate market has started witnessing a rise in labour costs, mainly due to a crunch in the availability of labour, sources in Puravankara Projects told.

Raw material input costs for construction constitute 40% of total project cost. Since input costs are expected to rise further, the real estate market will witness a further dip in sales of apartments across the country.

2 Comments

  1. Posted September 4, 2008 at 2:23 am | Permalink

    Property companies are rushing projects or cutting down on project completion time, by nearly 20 per cent in an attempt to overcome the liquidity crunch. Companies that took 3 years (36 months) on housing projects are now completing them in around 30 months by boosting efficiencies and using modern technology. One of the most significant reasons for the faster turnaround of projects is the decline in property sales by over 30 per cent in the last six months in Mumbai, national capital region (NCR) and other regions, which were the main revenue streams for developers. To add to their woes, the prices of cement, steel and labour, which account for more than half of the input costs, have risen 50 per cent over the last one year, putting pressure on developers’ margins. Construction costs, which vary from city to city, are growing 20-25 per cent every year, said industry experts.For more view- realtydigest.blogspot.com

  2. Abhishek Manocha
    Posted September 24, 2008 at 3:22 pm | Permalink

    That trend is going on for long now. Have to see what breaks will some regulators put on that?

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