Emaar MGF cuts home prices

Emaar MGF Land, the Indian unit of the West Asia's largest real-estate developer, has cut prices of apartments to make them more affordable and tide over a slump in demand for higher-priced homes.

"We have looked at different products to cater to the mid-market and the mass market,'' Shravan Gupta, vice-chairman of Emaar MGF, said in an interview in New Delhi today. Gupta also wants banks to cut interest rates on mortgages to boost demand.

The New Delhi-based developer, which cancelled a plan to raise $1.8 billion in an initial stock sale in January, is focusing on completion of existing projects and counting on sales of cheaper apartments as higher mortgage rates depress demand for homes. The Reserve Bank of India has cut its benchmark lending rate twice since October 20 to boost economic growth, lowering it to 7.5 per cent from a seven-year high of 9 per cent.

 

Interest rates on home mortgages haven't mirrored the reduction in the benchmark rate because banks continue to pay higher interest rates on deposits.

Interest rates for home buyers need to return to the 7-8 per cent level, Gupta said. State-run Bank of India on November 6 reduced the rate to 10 per cent from 10.75 per cent on 15-year loans for as much as Rs 5000,000 ($100,600).

The decline in real-estate prices alone won't help revive demand, Gupta said in a Bloomberg Television interview. The company is building apartments that cost between Rs 3000,000 and Rs 4000,000 near New Delhi and in Chandigarh ss market "We would have used the land to build more premium homes where margins are higher but we are utilising it to build homes for the mass market,'' he said.

Gupta is seeking concessions from the government including tax breaks to encourage developers to build lower-priced homes.

Finance Minister Palaniappan Chidambaram yesterday called on the industry to reduce prices to boost demand and shore up economic growth.

The International Monetary Fund expects India's economic growth to slow to 6.3 per cent in 2009 from an estimated 7.8 per cent this year. Prime Minister Manmohan Singh said November 16 that the country's pace of economic expansion may slow to between 7 per cent and 7.5 per cent this year, from an average of about 9 per cent in the past four years.

"With real estate contributing about 15 per cent to gross domestic product, the government needs to recognise the importance of the sector and accord it an industry status,'' Gupta said.

"Realty has a multiplier effect on various allied sectors and as a result leads to creation of several jobs.''