Developers May Increase Gujarat Residential Rates Post Diwali

Home sales are far and few, but a section of Gujarat builders is planning to raise prices by 10% post-Diwali. Real-estate experts however, feel that the move could possibly boomerang in the present market conditions. Rising construction and labour costs are the main reasons for a possible hike being considered by the developers most of whom operate in Ahmedabad and Gandhinagar. “Profit margins of the developers are being heavily dented by the rising costs. Therefore, we may consider a 10-12% rise in prices after Diwali,” Suresh Patel, president of GIHED (Gujarat Institute of Housing and Estate Developers), told ET.

“Of the total home bookings that happen throughout the year, 35% happen between Navratri (September 28 onwards) and Diwali (October 26),” Mr Patel said about the realty market in Gujarat which is worth Rs 60,000 crore. Of this, 40% share belongs to Ahmedabad. When asked if the builders were considering to offer any discounts to buyers who visit GIHED exhibition between September 30 and October 2, Mr Patel said, “There was no mention of discounts in our last meeting. The prices are not expected to go down. There could be an increase after Diwali,” he added. The builders’ body is organising a property show in Ahmedabad that will showcase over 500 projects worth about Rs 12,000 crore. Even the invites for the exhibition carry the phrase “now or never”, cajoling the buyers to go for an immediate buy.

Real-estate experts who did not wish to be named pointed out the possible move considered by GIHED was “irrational” and could back fire. “It is not possible to hike prices. At present there are no buyers in the market. Except for apartments costing Rs 25 lakh and below and some plotted developments, the sales are poor. For instance, the sales of three bedroom-hall-kitchen apartment and bungalows are down by over 60% in Ahmedabad,” the expert said.

Since Diwali, last year, there has been hardly any rise in real-estate prices in Ahmedabad. While prices have remained stagnant for the last several months, the sales have nose-dived. “Real-estate prices are their peak in Ahmedabad. Any further attempt to raise it will dry up whatever little demand remains in the market. However, if a discount of 15% is offered, the lost demand could be revived,” said a developer on conditions of anonymity.

Earlier while addressing a press conference on Monday, Mr Patel seemed to be in a denial mode. “The happenings in the global economy have never touched the property markets in Gujarat. In 2008, during the slowdown, the property markets in Delhi and Bangalore corrected by 12%, while Ahmedabad grew by 8%. This time too we don’t not see any effect on the local markets,” Real-estate experts point out otherwise. During the global slowdown, certain micro-markets in Delhi and Mumbai corrected by a maximum of 40%, while those in Ahmedabad saw a dip between 15-20%.

He also went ahead and compared Ahmedabad with Pune. “While homes costs a maximum of Rs 5,700 per square feet in Ahmedabad, in Pune they cost between Rs 4,200 and Rs 16,000 per square feet,” Mr Patel said. However a glimpse at only the office space market (which is a smaller market compared to residential) in both the cities shows that Pune with a supply of close to 3 lakh square feet of office space in the just the second quarter of calendar year 2011, was three times the size of Ahmedabad.