Like always during festivals, numerous offers including freebies are on for new homes. But will the customers bite.
With festive season about to peak soon, cash- strapped real estate firms and brokers have been upping their sales pitch to draw in prospective buyers. On offer are numerous freebies and discount schemes – ranging from gifts like gold coins to some expensive cars, depending upon the value or size of the flats.
Developers, hopeful of clearing a large portion of their housing inventory pile-up, are also luring buyers through cash-back schemes on monthly rentals, customisation schemes, free parking and club facility, zero brokerage, upfront cash discounts among others.
“Over the past few quarters, higher interest rates and the overall slowdown has led to a significant build-up of unsold units with developers in most of the major realty markets, adversely affecting cash flow and impacting new project launches,” said Neeraj Bansal, KPMG India partner.
Having seen the falling demand and liquidity crunch over the last few years, real estate companies in metros and cities like Mumbai, Delhi-NCR, Bangalore, Kolkata, Pune, Chennai and Hyderabad have already announced various freebies to attract buyers, who held back purchases during the economic slowdown.
On one hand, the prospective buyers are now expecting prices to fall, while on the other, developers are sticking to high prices with attractive freebies.
“There is a self-created liquidity crunch because developers are sticking to high prices and lenders are lending at high rates,” says Ravi Ahuja, executive director, agency services, Cushman & Wakefield (C&W) India, an international real estate consultancy.
This season, it has been observed that many realty firms have gone for soft-launches of their new projects in order to tap a select group of investors and existing buyers directly and through property brokers. In many instances, they give pre-launch or soft-launch offers even before the approvals are in place. While many demand 20-30 per cent price of the property value upfront, some ask for the entire amount. The offers by developers have a common objective — persuade buyers to invest and generate cash flow for their projects.
As far as common buyers are concerned, they are a little confused on whether it is advisable to invest on such lucrative and interesting offers. Unlike in developed markets such as the US, real estate companies in India depend on cash flow from buyers. To attract buyers and generate funds, developers offer above-average dis-counts even before they launch the projects formally.
“Soft launch is considered risky for buyers. However, once the project is officially launched, developers start increasing prices. At the same time, they allow buyers to sell under-construction properties after payment of 25-30 per cent price. So, buyers can make a profit by selling their stake either to the developer or a new investor,” says Bansal of KPMGE.