Developers woo homebuyers with price-guarantee schemes: What should you do?

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December 16, 2016 4:26 PM

Faced with a further dip in sales post the demonetization of high-denomination currency notes by the Modi government, developers have started wooing homebuyers – especially those sitting on the fence – with price-guarantee schemes.

It was anticipated that the secondary market will come to a pause, due to which the market in general is looking gloomy.It was anticipated that the secondary market will come to a pause, due to which the market in general is looking gloomy.

Faced with a further dip in sales post the demonetization of high-denomination currency notes by the Modi government, developers have started wooing homebuyers – especially those sitting on the fence – with price-guarantee schemes.

According to industry sources, demonetization has already led to a 30-40% drop in enquiries and sales of property across key metro cities, and the situation is unlikely to improve at least in the near future. On the contrary, some experts are expecting property prices to fall further in the coming months as sellers struggle to offload property to generate liquidity. This has naturally impacted the sentiment of homebuyers who were planning to buy their dream home in the near future. Now many of them are waiting for a correction in property prices.

Some developers have come out with price-guarantee schemes particularly to lure such buyers. These schemes are aimed at giving the assurance of adjustment or compensation to homebuyers if property prices go down in the coming days.

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Now the question is: should the potential buyers go for their dream home right now or wait for a further correction in prices?

Developers say that there is a very wrong notion in the market that property prices may further go down due to demonetization. “As a matter of fact, people should understand that in the current scenario, the demand for good-quality development by notable developers is bound to increase. It was anticipated that the secondary market will come to a pause, due to which the market in general is looking gloomy. In reality though, the market is absolutely normal, as primary sales are taking place at usual pace, which in the long run will increase the property prices,” says Avneesh Sood, director of the Eros Group.

He says that the price cushion being provided by certain developers through various schemes in order to assure customers that the prices of their property will not go down is just a marketing gimmick, and the buyers should invest cautiously and in only good projects being developed by reputed developers.

Secondly, the falling interest rate regime will definitely benefit the potential homebuyers. “With so much of liquidity suddenly flooding the market and banks having ample funds to disburse, interest rates are bound to come down by 1% to 2%, which will eventually result in EMIs going down further. This will turn out to be a big sentiment booster for customers who comprise mostly end users in the current phase,” says Kaushal Nagpal, co-founder, BookingKAR.

In view of all this, experts say that buyers shouldn’t wait further as this seems to be the best time to make a move.

“For end-users and investors, this is a very good time to make their move to secure the best bargains. Smaller residential developers and investors will be more eager than ever before to offload their inventory so as to alleviate their liquidity woes to some extent. The salaried class which uses home loans to purchase property will not face any problem at all because of the demonetization move. These measures will serve to make the real estate sector more transparent and wholesome, which means that future growth will be steady and rational. Those who invest in residential property in the current time can, therefore, look forward to very satisfactory long-term capital appreciation,” says Kishor Pate, CMD-Amit Enterprises Housing Ltd.

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Santhosh Kumar, CEO-Operations & International Director, JLL India, is also of similar opinion. “Because of corrections in the market, residential property rates in the primary sales segment have reached their lowest point now and cannot go down further. Demonetization has also put downward pressure on property prices in the resale homes segment. All things taken together, this is the best of times for buyers to make their move,” he says.

According to Kumar, RERA will certainly make the market more transparent, but the stricter procedures it introduces – coupled with the fact that the market will have recovered significantly by the time it is implemented nation-wide – may not make the options more cost-effective then than those that are available now. Investors always look for the lowest entry point, which has been reached in the primary sales segment in most larger cities.

The resale market, however, will doubtlessly correct further, and is in fact already doing so in many regions. “Every city has its upcoming corridors or outskirts where a correction in prices in the resale market will now take place. Therefore, for investors focused on resale options, waiting for another month or so makes sense,” informs Kumar.

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