UPDATE 1-Vipul sees slowdown, high rates impacting sales

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MUMBAI, July 1 (Reuters) - Real estate firm Vipul Ltd sees sales volumes drop this year due to rising home loan rates and slowing demand, but hopes to mitigate the impact by focusing on cheaper houses and non-metro areas, a top official said.

Vipul (VIPL.BO: Quote, Profile, Research), a New Delhi-based firm, which gets almost 80 percent of its revenue from the residential segment, said its sales volumes in major cities could slip by almost a quarter, and prices could drop by at least 7-8 percent.

Shares in the company extended losses on the news and closed down 20 percent to hit a year low of 64.50 rupees, in a Mumbai market that slid 4 percent.

Indian developers have been hit by slowing demand this year as a five-year rise in property prices, combined with the highest interest rates in almost a decade, have pushed away buyers, largely from the urban middle class.

Vipul, which last year sold 15 percent stake to U.S. fund Wachovia Corp (WB.N: Quote, Profile, Research), will now look to generate two-thirds of its income from the middle-and low-income segment with apartments costing 3-4 million rupees, and go to developing cities.

"Our projects are in upcoming markets like Bhuban%shwar and Ludhiana, where large infrastructure projects are coming up. So demand for housing will still be there," Managing Director Punit Beriwala told Reuters over telephone.

Vipul reported a marginal rise in FY08 net profit to 416.9 million rupees, though revenue rose 35 percent to 2.88 billion rupees. Beriwala said this was because earlier projects were sold at much cheaper rates, but were accounted for on completion now.

The company worked on a 25 percent operating margin in the last quarter, lower than its usual margin of 35 percent, he said.