A report by an international real estate consultancy finds that prices of newly constructed apartments are 15% lower, as compared to that of resale flats
Apartments in newly launched projects are going at lower prices as compared to prices of resale flats. According to a research report by Jones Lang LaSalle, an international real estate consultancy firm, home buyers in the Mumbai Metropolitan Region (MMR) prefer to buy freshly built flats, as builders are offering heavy discounts; nearly 15-35 per cent.
Older flats go into redevelopment, and hence are priced higher, say realtors. Pic for representation
“Registration data over the past three quarters reveal that an increasing number of Mumbai’s home buyers and investors are moving towards new launches. Their objective is to capitalise on the significant price advantage that these projects offer.
With discounts hitherto unheard of in Mumbai’s notoriously pricey residential market, the visible shift in the preferences of potential buyers from the resale to the primary market presents no mystery,” it reads.
For example, an old flat in Khar would cost nearly Rs 1.1 lakh per square foot (psf), but new units are being sold at Rs 50,000 psf. Similarly, in Kandivli, new launches are being sold at Rs 12,000 psf, whereas old flats go at around Rs 15,000 psf. Nearly 65 per cent of registrations were for new launches.
Charging a premium
Resale flats demand a higher price as they have low maintenance charges. But, the report says this reasoning is wrong.
Om Ahuja, the CEO of Residential Services, JLL, says in the document, “Sellers justify this premium by pointing out that their resale properties attract lower maintenance charges than units in new projects. This is a faulty rationale, at best. Keeping in mind the implementation of the new property tax formula, it is in fact more beneficial to opt for new launches instead of resale units in smaller projects. Also, the lower maintenance charges are often short-lived and wide open to future upward revision, in addition to the significant financial allocation one needs to make towards building repair costs.”
In the first quarter of 2014, the study says “Mumbai’s Western and Central suburbs distinguished themselves with having the most new residential launches. Since demand is extremely high in these belts, absorption was robust on the primary market. In the same period, transaction volumes on the resale market of these precincts were very minimal.”
Prakkash Rohira of Kkarma Realtors, a real estate consultancy firm, justified the higher ask for resale units. “Builders unfortunately are not trusted by buyers. Also, the older resale flats are bigger and have lesser loading,” he said. Mankodi Ramdas, a realtor from Kandivli, claims many old buildings are up for redevelopment. “Sellers count the redevelopment area during the sale. Thus, the prices are high in many old buildings,” he explained.