The Real Crash Hits Hyderabad.

In Exclusive Ventures' Report for Januuary 2009, we had mentioned:

"Mere reduction in sft rates by couple of hundred rupees is no more going to enthuse buyers. No amount of advertising and marketing blitzkrieg is going to help. The situation is currently beyond cure by such means."

Well....the cure is finally here! Its simple and straight forward! Crush the price by sledge hammer rather than mere chipping!

February 2009 is witness to the first REAL Price Crash of an existing, under construction Project in Hyderabad. This must be of great general interest to people whether they are looking to buy or not.

Hyderabad Builders have been holding on to high rates achieved in boom time and have been giving small discounts, lately. Obviously, buyers were absolutely uninterested.

The Home loan rate cut to even 8% had not generated any appreciable interest. The buyers obviously were looking for sizable capital cost reduction rather than cosmetic cuts in apartment rates.

Now for the first time, an existing project (APH 220 - right beside Lanco Hills -Betwen Gachibowli & Narsingi), is seeing a solid Rs.700/sft cut at one stroke to Rs.2250/sft from Rs. 2950/sft for Apartment in Risk Free Gated Community with HMDA Approval and Bank Loan, couple of Kms from Guchibowli.

Lets look back and put ourselves in first or second quarter of 2008 to appreciate the magnitude of cut. If someone had suggested such rate to Builders, they would have been ridiculed and shown the door. Builders were quoting Rs.2800 to even 3500/sft in these localities for 4 to 5 floor stand-alone buildings with like Lahari, White Lotus, Western and numerous panchayat approved small buildings etc. Buyers negotiated hard and settled with Rs.50 or 100/sft discount.

Many of our members had booked at Rs.2950/sft at APH220 in Aug-Sept 08 at pre -launch. Booking was taken for 2 Blocks only and they are in active construction since November 08. The revised rates will be applicable to our members who booked earlier. The BIG CUT in Rate translates to more than 12 Lakhs savings, on booking done for 1775 sft flats.


What does this crash mean for the market?

With pricing of Rs.2250/sft beside Guchibowli in Gated Township with 65% open area, the rates of stand-alone apartments in Manikonda, Raidurg, Puppalaguda should be below Rs.1900/sft. In fact, these were booked at whopping Rs.2800 to even 3500/sft as mentioned, earlier.

Also the rate of Rs.2200/sft and above for standalone apartments in Kukatpalli, Nizampet Road, Pragathi Nagar, Miyapur, Chand Nagar etc becomes unsustainable. (Though there were on and off report of lower rate, aa a class, there has not been any major cut in these localities)

With the builders who crash their price first, likely to take new bookings, those who resist will find it tough later, to survive.

This should also cause apartment rates in Kondapur, Lingampalli, Nallagadla, Tellapur etc to come down. For example, stand alone units in Kondapur has been holding on to above Rs.3000/sft levels for long. We should see Rs.2600 to 2800/sft, there.

Bottleneck in Price Crashing & Re-negotiation

With such fall actually hitting market, its time for existing buyers to get down and actually renegotiate.

In projects under early construction stage, there WILL be renegotiation pressure. Builders may crimp and squirm at this. But we are in a supposedly free market economy. When prices boomed, buyers did pay more. When prices crash, there has to be renegotiation. Builders who are able to understand the mechanics of the market will survive.

Many projects WILL find it tough to reduce rates since land is under development agreement with certain percentage of apartments committed to land owners. In such cases, developer WILL HAVE TO re-negotiate terms with land owners first, before they can offer large cut in rate.

Land owners have to be forced to take less apartments, than originally agreed, so that overall rate can be brought down. They will also have to suffer not just builders.

Home buyers who have booked in large townships will get benefited only if the developer is resourceful enough to hoodwink land owners. And they will do this, only if pressure from buyers is too much to bear.

Existing home owners have to show patience and hold on for couple of years. No point in panic selling.

About APH 220

The Project (APH220) is a very solid Property with HMDA Approval, Bank Loan and Construction in progress. Mr. Ram Kotaiah, MD of the Company is highly respected in the market and is Retd Chief Engineer from HUDA. He has rightly decided to move ahead rather than get tied up like others. He said that they did make money in old projects and now its time to give back. The Project will be almost on cost to cost basis with just enough margin to manage and build.

The intention of the developer is to get going with one more Block construction, in addition to the 2 blocks as planned earlier. We need to appreciate the BOLD & DECISIVE STEP TAKEN in tandem with market conditions.

The Project has very good Spec and all Modern Amenities including Club, Pool, Gardens, tennis Courts etc. Project is accessible from Oakridge / DPS School Nanakramguda (2.5KM) . It will also be connected to Guchibowli directly once the ring road from Manikonda touches Expressway (1.5KM).

The apartment sizes range from 1000 sft to 1775 sft, enabling wide seletion and making ownership of a a gated community up-market home, a possibility with budget as low as 25 Lakhs. Check Out APH220. This could be the right one.

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