WEAKENING SALES, RISING INVENTORY TAKE A TOLL ON DEVELOPERS - Honey, They Shrunk the Houses :The Economic Times

Realty players tweak product strategies, construct smaller apartments to make them affordable to buyers

Weakening sales and rising inventory levels in the backdrop of unaffordable housing prices are pushing realty developers to tweak their product strategies. Builders across markets are constructing apartments with smaller configuration with the aim to make houses affordable for buyers by reducing average apartment size rather than reducing capital values.

Mumbai Metropolitan Region (MMR), including Mumbai, Thane and Navi Mumbai, registered the maximum fall in apartment sizes on an annualised basis in the past five years, along with Bengaluru, Chennai and Kolkata. In Mumbai, which is already known for smaller and compact houses, has seen the average apartment size shrink 26.4% in the past five years. The average size of residences in Bengaluru, Chennai and Kolkata has also been reduced by 22-24%, a study by property consultancy JLL India revealed.

“Builders are exploring innovative ways to make residential housing across major cities more appealing to potential buyers at a time when it is becoming increasingly difficult to sell expensive apartments. They are emulating the famous sachet marketing strategy adopted by FMCG companies in the late '90s,“ said Anuj Puri, chairman & country head, JLL India.

While property prices are not purely a product of developer's discretion, the decision to alter apartment sizes as per the needs and spending power of buyers is definitely within their ambit. “Developers are looking at bringing in more efficiency into their offerings by focusing on what is genuinely required by consumers and to ensure the least amount of space wastage. Impractical luxury is something not everyone can afford,“ said Sunny Bijlani, director, Supreme Universal. “Given the rising input costs and various premiums and levies to be paid, per sq ft pricing is not completely controlled by builders, but offering smaller configurations can bring the total price down.“

The report states that several urban buyers are looking for new homes near their offices, which could be smaller in size. They prefer a house that is “sufficient“ enough for family requirements. This does not mean that they are compromising on their lifestyle; they prefer a compact home with basic amenities.

Buyers are increasingly opting for homes that are closer to their work places in order to reduce commute time. As these locations are more expensive than suburbs, buyers may be able to afford smaller units, which is more than acceptable. To enjoy the luxury of bigger homes with good amenities, consumers prefer to buy homes in peripheral areas of cities from where the concept of second homes is emerging at the outskirts of cities.