Developers in india start hiking up prices despite warning the property market is still fragile

Just a few months ago developers in India were discounting like mad and offering incentives to those willing to buy but now they are putting prices up and seem unconcerned that it could put off a lot of buyers who are re-entering the fragile real estate market.

DLF, the country’s biggest property developer is to consult property brokers to decide the pricing and number of apartments to be offered in the second phase of its Capital Greens project in West Delhi. It’s a novel experiment, but property brokers in Delhi say they believe that it is with a view to increasing prices.

Indeed a DLF’s spokesman confirmed that it has now yet fixed a final price and insiders said that a figure of Rs 7,000 a square foot is being talked about – this would be a whopping 56% more than Rs 4,500 a sq ft it charged in the first phase of Capital Greens, when it sold 1,356 apartments in a single day in April this year.

Many developers are currently increasing prices by 15 to 30%. For example, Mumbai-based Lodha Developers has increased prices by 30% in its premium housing project, Lodha Primero in South Mumbai, since its launch about four months ago.

Prices have gone up 12 to 14% in its middle income projects.

Neptune Group, another Mumbai-based property developer, has increased prices in its Neptune Flying Kite project in Bhandup by 26%. Unitech, the country’s second largest developer, is also considering a minor price rise in its home prices, a company spokesman confirmed.

‘Markets are looking up and this is prompting developers to come up with increased prices. Prices are up by 15 to 20% in the secondary market,’ said Anil Singhal, a property consultant based in Connaught Place, Delhi.

Developers say the move to increase prices is in tune with rising demand from home buyers.

‘When the market was down, we were quoting low prices. Since it has moved up, we have increased prices.

We sell according to the forces of demand and supply,’ explained Nayan Bheda, chairman and managing director of Neptune Group.

 ‘It’s a standard way of operating projects. It is a strategic as well as tactical move so as to offer value for those who have bought properties,’ said R Karthik, senior vice president of marketing at Lodha Developers.

However, analysts warn that property sales may fall again if developers increase prices sharply since the economic recovery is hardly complete. ‘Demand is coming back with much difficulty.

It does not make sense to increase prices now. They have to hold prices steady till demand comes back fully,’ said Anuj Puri, chairman of Jones Lang LaSalle Meghraj.

The fact that several banks have reduced home loans rates has added to the developer’s hunch that they can get away with increasing prices. But some have pledged not to increase prices. Parsvnath Developers Chairman Pradeep Jain says he doesn’t see any scope to increase prices for the next couple of months.