By: Neeraj Bansal, Director, Risk Consulting, KPMG India
Strong focus on project delivery within committed time by developers
In view of the adverse publicity and shaken customer confidence arising out of significant delays in delivery of projects across the states, there is a strong acceptance of this matter by top management of the developers and investors alike.
Hence in 2012 increasingly it is expected that the developers will put in place strong project governance and monitoring mechanisms (Project Monitoring Programs, Centralized Project Reporting and key support functions) to aid in cross pollination of good practices, weed out common issues leading to delays across projects and also leverage process standardization and technology to improve consistency in project execution. It is expected that 2012 will mark the year where smart investors will start placing a premium on developers with higher comfort in meeting project timelines.
Prices to rise marginally and then stabilize
The real estate developers have been resisting any price increase in-spite of rise in prices of construction materials with a view to garner higher sales during the festive season from October to December. However, it is expected that prices of residential category will rise marginally in the coming years to absorb the increasing cost of land and construction. Plotted developments will see a rise as an offering by developers to tide over the short to medium term issues of low absorption on account of higher construction costs and project management capacity challenges.
Large number of launches expected in the leapfrogged suburban locations of major cities
With growing urbanization, saturation in residential area and property prices beyond the reach of the service class, buyers and investors are scouting for nearby locations. The current scenario has opened up new locations for residential development, which were otherwise unattractive to both the developers and buyers. The far flung suburban locations, where property prices are relatively cheap, are expected to witness more projects in the near future. Several infrastructural initiatives are underway, which are bolstering the development of these suburban locations, to offer more housing options to the buyers.
Focus on Ultra Low Cost Housing by developers
The concept of Ultra Low Cost Housing is not well accepted by the developers. However, with growing urbanization and shortage of housing segments, the demand for housing units by the economically weaker sections of the society remains high and the segment is critical in increasing homeownership in India. Several developers have put of projects across various cities, where residential projects are being put up in the range of Rs.5 lakh to Rs.8 lakh. Further, with the Government laying high emphasis on “housing for all”, the real estate industry is expected to generate huge opportunities at the bottom of the pyramid[1].
Unit sizes to reduce
With the increase in the prices of land and cost of construction, per sq ft cost of apartment is increasing. To overcome this, it is expected that in the near future, the area offered to the buyers will reduce, to offer more housing options. The developers are likely to focus on increasing utility of the space offered.
[1] JLLM
