Real estate: Back to freebies this festive season

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Developers have been hit hard by a surprise move from the RBI that in a notification asked banks to restrict lending under 20:80 scheme for under-construction projects. Developers have been hit hard by a surprise move from the RBI that in a notification asked banks to restrict lending under 20:80 scheme for under-construction projects.
SummaryRBI restriction on loans under 20:80 scheme has developers reworking strategy to woo buyers without reducing prices.

believed, many back-dated agreements will be signed due to lack of a monitoring system. At one sales counter, a buyer was told that post-notification, prices would increase and the helpless buyer succumbed to it and agreed to go ahead with a back-dated agreement.

RBI has insisted that the disbursement should be construction-linked. A banking source said that not every bank has competent experts to understand or ascertain the construction process for the disbursement of the fund. “One can always hire those services from outside but then, it might just open up another window of nexus and corruption, the source added.

New Avatars

In the current slow market, most developers were planning to take advantage of the festive season with 20:80 schemes. After the RBI notification, several advertisements under the scheme were immediately withdrawn, and new variants are slowly making an appearance. “It is evident from the sudden withdrawal that developers were interested only in cheap funds and were not bothered about the buyers,” said Ganeshan.

One developer in the Mumbai region has advertised an interesting scheme. He proposes that after paying the booking amount of 20 per cent up front, the buyer needs to pay 20 per cent once every year, with the last instalment of 20 per cent on possession. The project has not yet started and a company representative said that it would be ready in 2016. This would not be linked to the progress of construction, though. This is irrespective of the loan.

There is another scheme doing the rounds: the 10:80:10 that is no different, only that payments are staggered in different proportions.

“It’s a sign that the residential sales are far behind developers’ expectations. The need of the hour would be developers to take a relook at the inflated prices they are quoting and the banks to come up with schemes which genuinely stagger out the financial liability of the buyer. If structured right it could go a long way in easing out the heavy inventory burden,” says Ganesh Vasudevan, CEO, Indiaproperty.com.

The key question then, will prices see a correction?

“Any discounts that we see this festive season will be a function of developers’ need to sail through the current difficult market conditions. With the slightest indication of a recovery in economy, this window of opportunity will close, as has been amply evidenced in the past,” said Ashutosh Limaye, head-research, JLL India.

Festive outlook

Given the general economic slowdown and

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