Is the slowdown forcing builders to move out of metros?

It’s been rather long that I haven’t posted. I was not in town and kept rather busy. Still, I owe you guys an apology.

Anyway, here’s something to cover up the loss…

Today, while going through the papers, I found a report in the ET with a header – ‘Small is beautiful in real estate finds Omaxe’.

As the headline suggests Omaxe has decided to stick to small projects to keep its costs low. It has even launched an integrated township in Vrindavan. And according to the report the township “will entail 1 Room (Studio) and 2 Room apartments ranging between Rs 7.25 lakhs and Rs 14.25 lakhs targeting frequent visitors.”

They have even projected a 12-15% net gain from the project.

Now…now, I have touched upon this subject earlier, but the point that I intend to make here is that more and more builders are moving away from the metros and the reason is simple – recession.

The ongoing slowdown has reduced the profit margin so much that investing in real estate in the metros no longer seems like a feasible option for builders.

In fact, an increasing number of companies have started focusing on their core businesses to counter the slowdown. And this trend has not just been restricted to real estate companies but has spread across the board.

Omaxe too is following the same route. The company, which started as a construction firm before moving on to real estate, has once again gone back to it’s roots by bagging a Rs 39.95 crore contracts from Haryana State Roads & Bridges Development Corporation.

This is what the company CMD Rohtas Goel said in the report:

“In the past six months we have received construction orders worth Rs 650 crores and we are expected to receive another Rs 650 crore turnover in the next six months.”

“We were a construction company by origin. We see this as good way to buck the slowdown in real estate business so we have restarted construction activity after we stopped it in the year 2000 to concentrate on real estate.”