Real estate developers are banking on discounts to lure homebuyers to overcome sluggish sales. Developers are offering promotional schemes targeted at customers waiting for the right opportunity to make an investment, Shveta Jain, managing director, residential services, Cushman and Wakefield tells Financial Express online. Excerpts from an interview:
Q. How is the real estate market in the present scenario?
A. Over the past few years, sales have come down significantly compelling developers to launch new schemes and offer discounts in various forms. The market is expected to revive only by next year as sales have started increasing but only marginally. The housing demand has been stable. However the purchase decisions are being led by the on-ground realities. Though completed projects, realistic delivery timelines and quality of construction have managed to sustain buyer interest in the NCR housing market, in most cases property purchases at pre-launch and launch stages of projects have dried up to a large extent.
Q. As the real estate sector is going through a tough phase, are developers taking routes like offering discounts to lure investors?
A. High inventory levels and slow residential sales over the last few years have resulted in developers giving significant discounts and freebies to lure end-users and investors. Most promotional schemes are targeted at fence-sitters waiting for the right opportunity to make an investment.
Q. If yes, what kind of discounts are they offering to boost sales?
A. Various promotional schemes include, interest-fee floor-rise charges have been witnessed in the market over the last few years. Developers have also given out freebies such as free air miles, free car in case of purchase of home in premium projects. Depending on the target group of the project, developers offer various rebates in order to persuade buyers. Some recent payment options doled out by builders include schemes such as no EMI or rent paid till possession, waiving of stamp duty, VAT, registration charges or freebies like car parking etc. Developers also leverage festive seasons to market their projects. Freebies like gold coins or holidays at foreign locations are some other attractions offered during this period.
However, buyers need to be wary of availing discounts at face value and instead look for hidden charges. They must always check if the discount is only on the carpet area or super built-up area. Reading between the lines would help buyers find out if there are certain hidden terms and conditions behind the freebies offered. For eg, schemes of 20:80 (This scheme allows homebuyers to book an under-construction property by making a down payment of 20 per cent of the cost of the property. The rest of the amount can be availed as home loan for which But instead of the buyer bearing the interest cost of the loan, the developer pays the interest till he gives the possession or for a particular number of years.)
Q. In the current market scenario what is the focus of developers?
A. Developers are likely to focus on key areas of demand which will be for locations that are either affordable (suburban to peripheral areas) or within the city where ticket sizes/ value make economic sense. We are witnessing developers move from luxury sizes to more compact size apartments thus culling the ticket value of an apartment to more affordable standards. For instance, a 3BHK size in a luxury segment would measure 1,800-2,200 sqft carpet area while the same in compact size segment would measure 1,000- 1,250 sqft carpet area. While price on a sqft basis remains constant for the same location, the ticket value of the apartment drops by 30-40 per cent thus making it more affordable.