One developer146;s idea: if prices are too high, go for a smaller flat

What does a developer do when skyrocketing apartment prices and rising interest rates push housing out of reach of households?

What does a developer do when skyrocketing apartment prices and rising interest rates push housing out of reach of households? For Unitech, India8217;s second largest developer, the answer is: reduce apartment size. This increases the number of apartments in the same area and lowers their total price, making them more affordable.

For instance, Unitech recently announced the launch of an integrated residential project Uniworld City in Greater Noida. What8217;s different about this project is the decreased apartment size. According to Sanjay Chandra, managing director, Unitech, this is to enhance affordability.

The size of apartments in this project will begin from 1,400 sq ft. The largest sized apartment will be 1,800 sq ft. The average size of apartments launched by Unitech earlier was 1,700 sq ft. 8220;By reducing apartment sizes, Unitech is capturing the mid-segment end-users, a market that has been ignored so far,8221; said Santhosh Kumar, chief operating officer, Trammell Crow Meghraj. The 100 acre project will also boost supply in the area, with the development of 4,000 apartments.

Unitech8217;s move to reduce the size of apartments and, hence, their total costs, is in sync with today8217;s market developments. Interest rates have increased by close to 50 per cent from their lowest point in 2003. From a low of 6.5-6.75 per cent, floating rates have risen to a high of 10-11 per cent today. Adding to buyers8217; woes, the ticket size of loans that customers can afford has also declined. By launching apartments that are moderately priced, Unitech is taking into account this reality.

However, while apartment sizes have been decreased, the price per square foot has risen. This project is priced at Rs 3,500 per sq foot. Unitech8217;s projects that were launched earlier were priced cheaper. For instance, Ashish Agarwal of Guide Realtors says that Unitech8217;s project Verve is currently priced at Rs 3,375 per sq ft.

A 1,600 sq ft apartment which would, at Rs 3,375 per sq ft, cost Rs 54 lakh would now cost Rs 56 lakh. But perhaps Unitech is not comparing likes. If a household is willing to step down to 1,400 sq ft, the cost would add up to Rs 49 lakh. The question is: will households be willing to compromise on space?