The astronomical surge in Mumbai's land prices which is causing development costs to shoot up is now forcing several Mumbai-based companies to test the waters in the North.
According to a CNBC-TV18 report, mid-cap companies like Oberoi Realty, Godrej Properties, Tata Housing and even Bangalore's Puravankara Projects are revving up plans to capture a share in the NCR and Gurgaon market by launching projects at the right size and right price.
Recently, a report by property portal 99acres.com, said among the seven major cities of the country housing prices have risen the most in the Delhi-NCR market during January-March quarter at an average 20 percent.
"While in Delhi, the prices are averaging or growing slowly, the NCR area is witnessing price appreciation owing to increased movement of people preferring improved connectivity and affordable housing."
But in order to prevent the same mistakes of their predecessors like DLF which burnt its fingers by stepping out of its home turf to take advantage of the realty boom, these companies are now tweaking their strategies by settling for the capital-light structure of joint development where the local logistics will be left to the local partner. Of course, the intent is to launch at a right price and increase sales volume.
They are also keeping their initial investment costs at about Rs 100 crore, substantially lower than the Rs 700 crore entry of DLF into the Mumbai market some years back.
Vikas Oberoi, CMD, Oberoi Realty, told CNBC-TV18, “We want to test the NCR market with a small investment and then see how this pans out. We have no experience in Delhi or anywhere outside of Bombay for that matter. Ideally, we would want to ideally do a joint venture, invest $20-30 million and not rush in with a big commitment.
The idea, of course, is to launch smaller sized apartments at the right price. Recently, Tata Housing's initial public offering (IPO)-style sale of homes at its Gateway Capital project in Gurgaon was over-subscribed 20 times.
Brotin Banerjee, managing and chief executive officer at Tata Housing, said : “We have received an overwhelming response for Gateway Capital and this assures us that there is a demand for quality homes in the market, despite contradictory speculation."
Godrej Properties, the real estate development arm of the Godrej Group, in April first week announced the launch of Phase III of its residential project, Godrej Summit, near Dwarka Expressway, in Sector 104, Gurgaon. Priced at a slight discount to DLF, the company was able to sell out all 695 launched apartments within hours.