Desperate builders resort to more freebies to sell houses, but buyers are just not biting

There is no doubt that a slowdown is taking place in India's real estate sector. This is prompting cash-strapped builders to now offer discounts like higher floors at no extra cost, zero stamp duty/registration charges, free parking slots, free interior works, and subsidised home loans to lure buyers. The technique is simple— rather than visibly reducing prices, builders are sweetening the deal.

A report by real estate research firm Liases Foras shows that property sales have fallen 8 percent across the top six cities— Mumbai, NCR, Bangalore, Chennai, Pune and Hyderabad— while total unsold inventory across the six cities stood at 832.09 million square feet, or 39 month's level against 31 month's a year ago, while new supply in the third quarter of FY15 declined by 9 percent. What's worse is that even launches have dipped. Another report by Cushman and Wakefield shows residential launches dropped 12 percent year on year in 2014 across the top eight cities. In Delhi-NCR, the launch of new homes dropped by 30 percent to 38,400 units in 2014 from 26,800 units in the previous year, while Mumbai saw a decline of 19 percent in launches at 25,000 units, while Bengaluru witnessed a fall of 17 percent at 40,900 flats.

Thinkstock Images

Thinkstock Images

Rising inventory and falling sales and launches implies however that the freebies are failing to impress buyers. While genuine buyers continue to stay clear due to the high pricing of flats, investors have instead chosen to put money in the stock markets due to a lack of meaningful appreciation in the realty sector.

RisC&W Executive Managing Director South Asia Sanjay Dutt said: "Despite the upliftment of economic sentiments post the election, the end user uptake of residential units has been restricted leaving a reasonable unsold inventory that developers would like to off-load."

Hard-pressed for funds, builders are now providing discounts and offering flexible payment options too. For instance, realty firm Supertech is offering a studio apartment free on the purchase of a Rs 1.38 crore luxury flat in Noida to woo customers. Under the scheme, if customers purchase 2,300 sq ft top floor flats worth Rs 1.38 crore in Capetown project at Noida, they will get free studio apartments of 500 sq ft worth Rs 22 lakh in Golf Village project on Yamuna Expressway.

There are also offers where developers bear the interest on a home loan for the initial two-three years while the project is under construction. Recently Nucleus Premium Properties in Kochi offered buyers a deal people lapped up instantly- a small initial deposit that ensured no interest or EMIs till possession. Dosti Imperia, a Mumbai-based realtor has introduced a special offer on home loans at 7.99% for the next three years against the prevailing interest rate of up to 10.50 percent fir its Thane and Wadala projects. Even Tata Housing has a similar scheme for its Mumbai projects.

A 770 sq ft two bedroom-hall-kitchen (BHK) apartment near Balkum in Thane by Runwal group is offering no EMI or interest payment for the next 24 months after making the initial 20% payment of the flat, while Wadhwa Group is offering zero service tax and Rustomjee Group is giving flats under the 20:80 scheme wherein the 80 percent is paid by the bank as per construction.

According to a report in the Economic Times, Bangalore's Leela Residencie, Brigade Cresecent and Marvel Developers are offering free luxury modular kitchens, air conditioners and top range wardrobe for higher end properties while Nitesh Estates and HM Group are offering up to 15% cash discount.Neptune Group in Mumbai is offering buyers possession on 50% payment while the rest of the amount has to be paid in 36 EMIs.

What this means is that builders are trying everything possible to push sales but as people shy away from buying property, developers continue to wrestle with high debt, construction costs and unsold inventory

Updated Date: Feb 16, 2015 09:58 AM

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