With `smaller projects' being launched in
phases replete with amenities that appeal to the new-age home buyer, are
the days of the good old big-ticket projects over? We find out...
Manjeet Dabral has always been im pressed with
big housing projects in Dubai and infact preferred to stay in one such
apartment over there. On his return to India, he wished to live in one
of the largest housing projects of Mumbai. However, he gave up on his
dream soon. The maintenance of the large project turned out to be a huge
challenge and he soon shifted to a smaller housing project.
“Creating consensus over basic issues in large
housing projects is a huge challenge in a city like Mumbai. Forget the
role of the developer's facility management team; even the residents do
not agree on most of the things. I feel we are way short of global
standards to live in larger housing projects and hence, living in a
smaller building makes more sense,“ says Dabral.
The perception of this home-buyer might have been
shaped out of some very specific reasons, but it is quite obvious that
he is not alone in Mumbai today, who thinks that smaller projects are a
better option than larger size projects. It seems, within the built
environment of Mumbai's real estate market, not only the home-buyers but
also the developers are realising the advantages of smaller housing
projects as against the larger ones. And hence, the new fad is to divide
the project into phases and make it into smaller projects.
At an outside view, it might give the impression that
it is the execution challenge and the approval bottlenecks that are
goading the developers to opt for smaller projects, but an even stronger
driving factor is the realisation that the new regulatory regime, post
the formation of the real estate regulator, would make it safer for the
market to embrace the idea. Developers seem to agree with this. Vineet
Relia, managing director, SARE Homes, agrees that breaking down the
bigger projects into smaller phases or units has always been a better
strategy in terms of both, money and time management. Since, according
to the new laws, all such phases or units can be registered as an
independent project; it will be easier to finish a small project in the
stipulated timeframe.
“There are developers who are already working on the
same model. What amenities need to be added in the smaller or larger
project is completely at the discretion of the builders, as there is
always a cost attached to all these benefits and facilities. Since
townships are planned communities, they always offer better amenities
than the standalone properties, but are 10-15 per cent costlier,“ says
Relia.
The question is whether the small projects can give
the kind of amenities that large projects offer. The opinion is divided
but Rohan Agarwal, managing director, Geopreneur Group, maintains that
the developers face a lot of problems while constructing a small
project. But they still strive hard to give amenities in these projects
too, as it is the need of the hour for the customers who are looking to
buy a new house.
Analysts point out that the developers have done
their cost and benefit analysis and have come to the conclusion that
there are four main reasons in Mum bai, why they should adopt this model
of breaking up larg er projects into smaller ones.
One is that it is often challeng ing to manage the
large amount of cash flows in larger projects. If the developer does it
in parts, he has to manage the cash flow in smaller amounts, which is
more easier. Secondly, with a very large project, there comes the sales
challenge of a large inventory. This inventory can also lead to a
pile-up inventory when the market is sluggish. Smaller projects open
fewer inventories and when that is sold, it also helps generate funds
for the further construction of the project. The third reason is that
the developers also consider an appreciation over a period of time.
Hence, if they do it in phases, the project in the later phase might be
able to avail the appreciation in price.
And last, but not the least, smaller phases can give a
better control of operating processes, which enables the developer to
concentrate on the quality of work. Arvind Nandan, director, South Asia,
Colliers International sums it up by adding, “The developers are doing a
smart thing by going back to the drawing board and executing what they
are capable of, instead of getting into large-scale projects where the
execution risk has always been very high. It is not only smaller
developers but also large ticket developers who are trying to adopt a
business model where disclosures are easy to comply with. It is a good
thing for the home-buyers too, who in any case, are no more ready to
wait endlessly due to the delays. In my opinion, it is a phase of
consolidation and the market will definitely get more mature out of this
process.“
In a nutshell, whether it is the execution risk or
the regulatory risk ahead, the developers are in creasingly realising
the advantages of dividing the larger projects into ividing the larger
projects into smaller ones. This sounds well for the home-buyers since
the execution timeliness and the fiscal management of smaller projects
are more realistic as against the larger ones.
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