NAGPUR: Realty major Mahindra Lifespaces, which is coming up with a residential complex in Mihan area, is now admitting that this ambitious project has been lagging in demand for housing. "The beginning was encouraging indeed with aircraft maker Boeing taking up a lot of land along with IT players like HCL and others. But the slowdown has hit housing demand from within the SEZ itself," said Anita Arjundas, group CEO (real estate), adding that a part of their project is nearing delivery stage.
Arjundas was in the city to unveil a sample house at the Mihan project. However, the company has high hopes with recent developments like Tata Consultancy Services (TCS) beginning construction for its set-up and Infosys scheduled to perform a ground breaking ceremony on February 22. "The next couple of years could see some demand from professionals working in these companies. It takes around one-and-a-half years for IT companies to get operational. So, even one company like Infosys, which may employ 4,000 persons, can generate good demand for housing in this area," said Arjundas.
She said the company is also planning to begin work on a new project covering a cumulative area of 6 million square feet in six cities. But, at the same time, she also admitted that there has been a slowdown in demand for fresh homes by around 20 to 25%. Though there has not been any reduction in prices, the rates have certainly stabilized due to the demand factor, she said.
However, apart from the cost of land, which is mainly blamed for high realty prices in India, Arjundas said even construction cost has a significant contribution in jacking up the rates. "Generally, the cost of construction is known to be more or less stable. But there has been a 30% increase over the last couple of years as against an expected rate of 5%. Currently, the basic cost of construction throughout the industry ranges from Rs1,800 to 2,000 a square feet, which his substantial indeed. Even labour costs have gone up considerably. Delay in getting approvals is also adding to the cost overrun," she said.
An increase in demand due to growing disposable income in Tier 3 cities is also seen, though so far Mahindra Lifespaces has not ventured into this area, limiting its projects to the Tier 2 cities, those like Nagpur. The company has projects with a cumulative area of 5 million square feet currently under construction, said Arjundas.
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