More price rise in real estate can't be ruled out; we are on wait & watch mode: Nayan Raheja, director, Raheja Developers

The COVID-19 pandemic and the ongoing war at Ukraine have altered the dynamics of the real estate market in India by pushing cost of construction upwards - making it difficult for realtors to find the right balance between cost versus pricing. On the other hand, surging demand for residential homes and lack of enough supply have brought back demand - a phase that was long awaited. Nayan Raheja, Director of Delhi-based Raheja Developers, shares his views, concerns and the market outlook with BT in a candid chat. Edited excerpts:

BT: How has been the business since COVID and what are the challenges you are facing now?

Nayan Raheja: Over the last few years, the industry has been facing challenges over inventory offtake. As a result, the number of new projects that are being launched in the National Capital Region have come down significantly. The demand-supply mismatch in the past also meant that the number of serious developers are now much lower. On this backdrop, post-COVID when demand surged, ready-to-move properties were all sold out and now the only option that is left for homebuyers is to go for under-construction projects. As a result, prices of plotted projects have nearly doubled, while for group housing its up by 30-40 per cent over the last two years.

Moreover, [there has been a] steady rise in prices of key raw materials like steel, copper, aluminium and cement, among others. This has made unfeasible to operate at previous levels and thus, we have already affected 10 per cent price increase across the board. We are making representations to the government through industry bodies like CREDAI and all, for their interventions because price correction is the need of the hour now. Because the consumers’ income hasn’t gone up as much as the prices are rising. Thus, willing homebuyers may not able to afford the increase in home prices. 

BT: What has been the impact of the ongoing Russia-Ukraine war on the local real estate industry?

NR: The biggest impact of the war has been the constant rise in fuel prices, which is reflecting in growing cost of logistics and transportations. This is heavily impacting the costing for real estate industry. Coupled with other factors, like price increase for other commodities, this is putting pressure.

BT: Are you planning to hike prices further or 10 per cent increase is enough for now?

NR: Actually the 10 per cent hike that we have implemented is for under-construction projects that are still far from completion. For projects that are nearing completion, like over 80 per cent complete, we haven’t implemented any price increase. I think, we have to wait and watch very carefully on how the market dynamics change over the next few months, before taking any further steps towards change in pricing. 

BT: Has the ongoing inflationary pressure impacted demand yet or is it still stable?

NR: The demand so far has been largely stable. Yes, there may be some 5-10 per cent fluctuations in demand that can be noticed but that could be due to other factors as well. Since the number of prominent developers and the number of new projects both are much lower than earlier, consumers don’t have much choice. Earlier, we used to witness launch bonanza for new projects every now and then but now may be one project gets launched in two months in the NCR region. 

BT: What’s your plans on new projects?

NR: Within the next three months, we will launch a lot of plotted colony, independent floors and shop cum office projects primarily in Gurgaon. These are in advanced stage of planning and licensing. We are also interested in out station opportunities, like holiday destinations and redevelopment projects. 

BT: Why are the plotted development projects gaining interest from developers more than high-rises, of late?

NR: The shop-cum-office policy allows plotted developments in smaller projects more viable. While, demand for plotted projects is much higher and they get sold out much quicker. This results in realisation of faster cash flow for us. But it is not that we are only launching plotted. There is a healthy mix of 50 per cent plotted and 50 per cent built up projects.