Discounted dwellings

Written by Garima Pant | Updated: Oct 27 2008, 05:07am hrs
Vivek Rai is in a fix. He is unable to make up his mind whether to opt for a discount on booking or go for a flat pre-fitted with air conditioning. His mind is also getting diverted with the gold coins on offer, considering the new highs gold prices are touching. And Vivek is not alone. With the real estate market going through a lull due to the global economic crisis, developers are resorting to offering freebies and gifts in this festive season to attract buyers.

Freebies galore

Era Landmark, a Delhi-based developer is offering a discount of Rs 75,000 on booking for its housing project in Meerut. They are also offering gold coins or cash equivalents on booking for housing projects in Palwal, Faridabad and Gurgaon. At the Gulmohur Tower project in Ghaziabad 10% is the down payment, 65% financed by the financial institutions and rest 25% paid by the customer on the time of possession. In the meanwhile the EMI of that 65% loan amount will be paid by SVP builders. We are also offering Rs 40 per sqft discount on cash down payment, says Vijay Jindal, CMD, SVP Builders India. And Jindal asserts that the group has received a tremendous response for the project.

Omaxe had recently offered gifts like gold coins and luxury massage chairs during Navratras. They believe that the investors and end-users usually make decisions either before or after Diwali season. Pearls Infrastructure does not offer any special discount during Diwali but does give discount on direct bookings, corporate discount on bulk bookings and special incentives to brokers on completion of the targets. This offer is available throughout the year so it is also applicable during Diwali time also says Vandana Sinha DGM, Marketing.

Not all discounts are cash-based. Instead, developers are being generous in kind with value offerings such as free parking or free furnishing. This includes flats pre-fitted with air-conditioners, imported or wooden flooring and imported bathroom and kitchen fittings. Delhi-based Design Arch has a whole gamut of Diwali offerings in store for its buyers. We are not offering discounts but a range of gifts like multi-door refrigerator, microwave, LCD TV, washing machine, laptops, I-phones, sofa sets, dining tables and diamond jewellery, says Jawahar Shan, VP, Marketing, Design Arch.

Why Diwali

Traditionally this has been the time when people go in for buying property. Although we have made an offering just a while back, the response has been positive, says Deepak Aggarwal, CEO, Era Landmarks. He adds that by offering these schemes developers are just preponing their sales.

Says Sandeep Goel, Managing Director, MSX Developers, a Delhi-based real estate company, Developers, especially those in the middle rung, face the danger of their projects finding no takers. Since sales are dropping, developers are extending freebies to draw customers. So its up to the buyer. He further advises that the freebie schemes are not totally out in black and white, so the better one bargains, the more benefits one you will corner. It is the negotiating skill of the buyer that can bring the price of a residential unit down.

To catch a potential home buyer, a number of offers are made. Discounts on per sqft of property reduce its overall cost. Developers tie up with companies and offer discounts to their employees. They pay the interest component of EMI up front to bank on behalf of buyer till the mentioned date of handing over possession of flat. Stamp duty and registration constitute 4-10% of cost of house and a developer bears the cost of registration either partly or fully. They also provide free covered parking space or exempts preferential locations charges.

Read between the lines

But one has to be wary of the hidden factors. For instance, under the no EMI till possession deal, the customer will need to pay off his home loan if the project gets delayed beyond the date till which the builder has paid the loans interest component up front to the bank, says Goel. Many a time hidden costs are not revealed up front and buyer may have to pay more than what he thinks he has saved on the discount. The main limitation of these offers is that they are only for specific projects and for too a small period. One may feel pushed to take a call in a very short span of time regarding lifelong purchase.

In a different league

Big players like Raheja and other developers like DLF and Uppal Group are missing from the freebie offering list. Navin M Raheja, Managing Director, Raheja Developers calls these discounts and festive offers as a desperate move by developers to boost liquidity. We dont need to make such offers as the response to our projects is quite good. These offers should not be the focus of the customers but they should opt for value for money instead, says Raheja.

Prakash Gurbaxani, founder and chief executive of Bangalore-based QVC Realty, said competitive pricing is the key to sell property than discounts. Nobody will wait for a Rs 5 lakh discount to buy a Rs 2 crore house. You have to price the property right in the first place and product should be good, he said. Some realtors and consultants are also of the opinion that the discounts and offers would not help improve property sales since home loan rates are high and property prices are out of reach of ordinary buyers.

Market slowdown

The home buying season in India typically starts during the festival season (Diwali) and ends in the month of March and most builders do almost 60% of their business in this period. But this year has been quite depressing in terms of property sales. Our overall sales have dropped by more than 40% this year in comparison to Diwali last year. And if one looks at the market scenario in the last five years, substantial business opportunity was generated during this time. But this year it has been worse, says Raheja.

Mathura-based Shri Group too has witnessed a slowdown of 30-40% in their sales. But that still doesnt deter them from offering year-long discounts of 7.5-10% at the time of booking. Discounts always lure buyers as we cater to the human psychology of giving something more in less cost, says Sudeep Agrawal, MD, Shri Group.

Experts and industry players believe that the real estate market is likely to see a change within the next three-four months. The housing segment has always had a great demand and if the correction in the interest rates happens by another 1%, the market will see a boom again, says Raheja. Rohtas Goel, CMD, Omaxe says We foresee more growth in the sector in next six months.