One of the reason they are not building smaller units is because residential titled land is guided by density. Meaning to say there is a limit to unit per acres. Normal density will range from 60-100 units per acre. Based on 40 acres and 2800 units , they are getting arou d 80 units per acre. If they build small unit they will earn less as the no of units is fixed. But the size of the units is not fixed. This may be one of the reason they build a bigger unit ie 1,400 sf and 1,600 sf.
Those in town launching small units is usually commercial title and is guided by plot ratio.
Normal plot ratio is 1:4 in town. Plot ratio allows the developer to build based on area. Let's say you can build 500,000sf of NFA, they will surely build smaller unit as there is no cap on the number of unit. Of course some area you gotta look at height restriction and also special conditions ie next to the palace, embassy etc.