What’s the price of a house at Malad (a Mumbai suburb)? It is Rs 3,000-6,000 per square feet, mentions the recent report of real estate consultant Jones Lang LaSalle Meghraj. What about a premium locality like Vasant Vihar (Delhi)? Rs 19,500-32,000. The residential price is no longer a single number to be taken as reference points to buy or sell houses. The price band is only elongating — confusing buyers, sellers and analysts alike. Though earlier, prices of houses varied within the same locality, the extent wasn’t as much.
“Our analysts are increasingly finding it tougher now to put up a single residential price for a locality. The price band has gone up and our data reflects that,” says Jones Lang LaSalle Meghraj chairman and country head Anuj Puri. Pick up any real estate report and you will find similar findings. The price band of residential prices in the same locality has been the highest in 2008. This is as per data provided by the above-mentioned consultant over a period of five years across Delhi, Mumbai, Bangalore, Kolkata, Chennai and Pune.
Price of Koramangala in Bangalore) was Rs 1,250 per sq ft, a single number. In 2008, prices were in the price range of Rs 7000-8000 per sq ft. Prices in Park Street in Kolkata moved from Rs 3,500 in 2003 to a wider range of Rs 7,500-10,500. Prices of Worli (Mumbai) moved from the price band of Rs 5,500-10,500 in 2001 to Rs 16,000-40,000 in 2008. Places with wider price band include Alwarpet and Nungambakkam in Chennai, Andheri and Santacruz in Mumbai, Vasant Vihar in Delhi, Koramangala and Bannerghatta in Bangalore, Ballygunge and Park Street in Kolkata and Kalyani Nagar in Pune.
What could explain the reason for such varied market prices? Says Dharmesh Jain, CMD of Nirmal group, a Mumbai-based residential property builder: “Every suburb has its own hierarchy and currently there is a 25% price band in Indian markets. This is mainly on account of product differentiation (coming in luxury, super luxury and other segments) and differences due to construction quality. While sometimes the price varies because of builders’ pricing strategy, many a time it is also the builder’s reputation in delivering quality products that plays a key role.”
Mr Puri adds another significant point: “The price difference is mainly due to the differences in demand for newly-constructed house compared to that of old buildings.” Old buildings while bereft of latest amenities, often need constant revamping, adding to the cost of owners. Buyers today are willing to pay a premium to buy a newly-constructed house.
With an average age of a house buyer falling, preferences are also changing. The average age has come down to 32 years from the levels of 38 witnessed years ago. “And this younger generation prefers the latest amenities and like-minded individuals staying in their locality. They don’t mind paying a premium for getting those extra amenities,” says Mr Puri.
In the last four years, there has been a plethora of new constructions that has happened across the country. And many come with latest amenities like swimming pool, gymnasium, spa, community hall and playing area. The super luxury projects goes further to offer themes like ‘water’ or ‘venetian’. The cost of such premium apartments is usually 40-50% higher than a non-premium flat in the same locality. One case in point is that of premium residential project ‘Lodha Aqua’ at Dahisar (Mumbai suburb), where the rate was significantly higher than the then prevailing market rate.
This trend of price variations though seems to be Indian phenomena. In the western world, prices don’t vary as much. Explains Mr Puri: “Old residential properties, say, in places like London or New York are well maintained and refurbished every 5-7 years. So the prices don’t vary as much as compared to new properties.”
Adds Mr Jain: “In cities like London, you witness similar category of residential premises from a locality with similar prices. However, it is not so the case in India.”
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