With thousands of homebuyers yet to get possession of their apartments even after a decade, people have become wary of real estate developers, especially in projects that are yet to take off and that may take years to be completed. And that is why independent floors are gaining traction these days.
In the midst of the Covid-19 pandemic, demand for independent units has gone up as homebuyers see this asset class as a low capital investment with limited project execution risks and a faster exit opportunity. For developers, it is a means to generate quick cash flows and a smart strategy to liquidate land banks to raise working capital.
Compared to a high-rise development, which requires construction finance and has a long-drawn construction cycle, the end-user today prefers investing in real estate where there is a visible structure and delivery is barely a few months away.
Developers are lining up to launch independent floor homes in NCR cities. As many as 20,000 independent floor flats are expected to be launched just in Gurugram and Faridabad over the next 12 months.
“As many as 4,500 independent flats have already been launched in Gurugram and Faridabad in the first three quarters of 2021, accounting for over 40 percent of this period’s total supply in these two cities. Approximately 10,970 units across different property types have been launched in Gurugram and Faridabad between January and September 2021, of which 4,500 are independent floor units,” says Santhosh Kumar, vice-chairman, Anarock Group.
More living space
The average size of an independent/builder floor flat outstrips that of an apartment, and the average sizes have been increasing over time. By contrast, apartment sizes were shrinking until the pandemic changed things.
The average size of a builder floor flat is currently 2,000 sq. ft while that of an apartment is 1,375 sq. ft—a difference of 625 sq. ft. Since the onset of Covid-19, buyers have begun to prefer bigger spaces, and they get these in independent floors, according to data shared by Anarock.
In the 2006-10 period, the average size of a builder floor (1,585 sq. ft) was almost the same as that of an apartment (1,500 sq. ft). In the 2011-15 period, the average size of apartments remained more or less the same at 1,475 sq. ft while that of independent floors increased to 1,800 sq. ft. Between 2016 and 2020, the average size of apartments reduced to 1,350 sq. ft while that of independent floors increased to 1,925 sq. ft.
Losing out to highrises
The concept of independent floor homes as a property type is not new in Gurugram and Faridabad, and existed well before the pandemic. Between 2006 and 2010, these two Haryana cities added nearly 21,300 independent floor units.
Supply of independent floor homes dropped by more than 50 percent to approximately 10,000 units between 2011 and 2015, when highrise apartments started gaining prominence.
Between 2016 and 2020, the overall new supply of independent floors plummeted further—by 73 percent—against the preceding period, with just 2,990 units being added.
Quicker turnaround for buyers and sellers
As for prices, independent floors were available for Rs 3,500 per sq. ft in 2006-10. This increased to Rs 4,300 per sq. ft over 2011-15 and Rs 4,800 per sq. ft over the 2016-20 period. The current price is around Rs 4,900 per sq. ft, as per the data shared by Anarock.
Apartments were available for Rs 3,600 per sq. ft in the 2006-10 period. This increased to Rs 4,450 per sq. ft over 2011-15 and Rs 4,588 per sq. ft in the 2016-20 period. The current price is around Rs 4,650 per sq. ft, as per the data.
“There is traction primarily due to changing buyer preferences following the onset of the pandemic and the Haryana government’s Deen Dayal Jan Awas Yojna scheme,” says Santhosh Kumar. “Under this scheme, developers can build independent flats up to four floors and sell them individually. Many developers with land banks in these cities are now lining up for licences to construct independent floor homes.”
A major motivator is the fact that the development turnaround time for independent flats is faster than highrises, providing an opportunity for faster monetisation. Also, money generated from builder floors starts flowing in within a year, while highrises take at least four years to pay off.
Homebuyers today are keen on quick possession. The possession time for independent floors is significantly shorter than for multistoreyed apartments. Builder floors are also gaining popularity because they combine the benefits of both traditional apartments and villas. With one flat typically constructed on a single floor, occupying families have more space and privacy in this property type compared to a highrise.
Developers lining up launches
Earlier, independent floors were typically developed by local NCR developers. Today, branded players such as DLF Ltd, M3M, Trehan, Signature Global, BPTP and Raheja are in the fray.
In an analyst presentation, DLF had said that the company launched 1.5 million sq. ft of new residential products of which over 1.3 million sq. ft has been sold. Sales bookings from the new products were to the tune of Rs 1,464 crore.
“DLF introduced independent floors across Gurugram, which saw an encouraging response from the market. The company continued to monetise its completed inventory and witnessed a demand pick-up across all segments,” the presentation had said.
A few months ago Signature Global launched Signature Global City 37D in sector 37D, Gurugram. Spread over 20.6 acres, the project, being built under the aegis of the Deen Dayal Jan Awas Yojana (DDJAY), will have 1,296 Independent Premium Floors in 324 plots, and will be developed with an investment of Rs 700 crore.
The company plans to launch 918 more independent floors worth Rs 50 crore this festive season. Of these, 364 floors have been launched as part of the Signature Global City 92 project and Signature Global City 81 project. The remaining units will be launched soon, company officials told Moneycontrol.
Another developer, M3M Group, is wooing buyers with 3,000 2.5 BHK and 3.5 BHK units as part of its independent-floor offers this festive season. The project, which is to be launched in November, will be located in Sector 89, New Gurgaon.
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