For the real estate industry in the country the last few quarters have been something they hadn?t hoped for. The sector has been plagued by a combination of oversupply ? with many established developers and new entrants announcing huge projects both in the commercial and residential properties ? and high interest rates ? deterring buyers. Adding to the worries is the spiraling cost of property. ?Three months before the festive season, sales were down by around 30%. The reason for the slump is mainly the high interest rates. Yes, there is over supply, but that is only in a few pockets like Gurgaon and other parts of the NCR,? concurs Rohtas Goel, chairman, Omaxe Group.
Agreeing that in the recent past there has been sluggishness in the growth rate due to availability of credit, that too at high interest rate and because of less willingness of banks to give loans owing to low liquidity in the market, B P Dhaka, spokesperson, Parsvnath Developers, explains, ?We are a leading player in the country and are not left untouched by whatever good or bad happens in the industry. As far as we are concerned, demand has gone down by 25% on a monthly basis.?
But the festive season came in as a respite with players using it as an opportunity to boost sales. Companies seized the festival season opportunity to connect with their customers and also make up for the loss to some extent. Freebies like gold coins to cars to LCD TVs were being dangled and there were efforts to play on sentiment buying during Diwali. Does it help? Or did it help? While it is a bit early, one can spot a trend.
Omaxe, on its part had offers like gold coins, complimentary TV sets etc, lucky draws with Maruti Swift as the coveted prize. It claims that sales in the festive season have doubled, and there has been a 100% increase in sales on a monthly basis.
?The promotions by us this time were more or less the same as last times, maybe a little on the higher side, but there was nothing completely special. They were standard for the whole of India. You see, it is not about the offers, had we given these freebies before the festive season it would have not affected our sales at all. People like to wait for the festive season; the mood is more upbeat then, as it is a more auspicious period to make such kind of purchases,? explains Goel.
In the past, the offers were largely restricted to additional carry ons like freebies or gifts. This time companies are trying every trick in the book ? and outside. Taking a different approach Parsvnath offered its customers an attractive EMI rate of 2.99% till the time of possession ? a first, which enabled direct participation in purchase. ?Because what usually happens is that many builders make promises and don?t deliver on time. So, the customer will have an advantage there if there is a delay or no delay. Though, we would make sure there isn?t any as it will be a loss for us. The offer has found good favour with our customers and there has been a 20-30% increase in sales to give a conservative estimate,? says Dhaka.
While these were some examples of the standard offers that builders gave to their customers, there were others who negotiated deals on a one-on-one basis. Bargain offers like houses with furnished kitchens or deals like all ACs installed, woodwork done, getting the tiling put etc worked well with the customers. By taking this alternate route, developers didn?t have to offer standard discount and stuck a good deal on bulk orders with the dealers, for example, of ACs.
Industry observers say that these kinds of offers are a recent phenomenon, which were not tried before. According to Raminder Grover, president-residential, Jones Lang Lasalle Meghraj such promotions will continue even after Diwali as builders are desperate to sell off. ?They can?t cut the prices as that will flatten the market.?
Interestingly, the slow down in demand has also been for other reasons ? the investor angle. ?I am not saying that the real estate is no longer an attractive proposition for the investors but how one chooses to invest. The stock market was good, so some interest got diverted on that front. High interest rates also play a part, but not that big as someone who would buy a property for X amount, will not mind buying it for X.1 amount,? explains Ajay Aggarwal, Director, Suncity Projects.
Also, people are no more investing in property for a very short-term duration. ?They used to do it just haphazardly, grab whatever came their way. That is changing now and getting more organised. Also, there were many new players, without established identities who promised, but didn?t deliver on time. This affected investors? confidence. And they became choosy to an extent, which is in a way, good news for the seasoned players,? he adds.
While the festival season came to the rescue of the builders and helped them to shore up their otherwise dull sales, the fact is that the season cannot last forever and developers have to look at different ways to boost sales.
One thing that market watchers are keenly discussing is a correction in prices. But will that happen? ?I don?t think there will be any correction in prices. What has happened in the last six seven months, has been very good. Earlier, there was a straight-line graph, now there has been a slight change in angle,? says Aggarwal of Suncity. Goel of Omaxe agrees as he says, ?As far as correction in the prices is concerned, I don?t foresee a major dip or appreciation.?
Aggarwal adds that foreign investment in the sector is good. Despite the fact that the government does not want a lot of it to come, investors are finding new mechanisms to invest in India?this shows their interest in the Indian market. Meanwhile, Grover is expecting the interest rates to come down in the future which will bring back the buyers to the properties.