New Delhi: Claiming they are responding to Union finance minister P. Chidambaram’s request that builders lower prices to generate demand for real estate, two industry lobbies formally called on their members to reduce prices.
The National Real Estate Development Council, or Naredco, asked its members to give price “discounts” of up to 15% to revive sales, two days after the Confederation of Real Estate Developers Association of India, or Credai, told its constituents “to make every effort in lowering prices” across the country.
The industrywide move potentially gives some leverage to builders who were facing what were inevitable price cuts in a stalled industry sitting on large inventory and finding no buyers, and in danger of running out of cash.
“In the overall scheme of things, developers are also probably giving a signal to the finance minister that we are doing something and the government also needs to do something,” said Sanjay Verma, executive managing director of the Indian unit of real estate consultant Cushman and Wakefield Inc. “The only way cash flows will come into the real estate industry is by enabling transactions to happen.”
Indeed, “Some developers across the country have already reduced prices. Credai now requests all its members to do the same,” the association had said in a statement.
The group claims membership of around 3,500 developers.
Naredco has asked its 500 members to cut prices by reducing costs, cutting profit margins, reducing advertising and brokerage costs.
Developers such as Ansal API Ltd, Omaxe Ltd, Assotech Ltd and DLF Ltd have already agreed to reduce prices, while Bangalore-based Sobha Developers Pvt. Ltd has promised to consider it, Naredco’s president Rohtas Goel, also chairman and managing director of Omaxe, told reporters. “On (many) existing projects the prices have already fallen by 20-40% across the country,” he said.
The council has asked its members to give a discount of 1-5% on existing projects to customers paying on time, 5-10% discount on new projects and 10-15% price reduction in affordable housing projects with prices that start from Rs3 lakh and run to Rs20 lakh an apartment.
On Tuesday, Chidambaram had asked companies, including real estate firms, to cut prices and revive sales. “We respect the concerns of the finance minister and are ready for price cuts,” said Goel.
Meanwhile, Naredco has asked for a reduction in the interest rate on home loans by at least 3-4 percentage points to 7%. The council has also asked for rescheduling of bank debt to developers with a moratorium of one-two years. The industry body also asked for an easing of external commercial borrowings and foreign direct investment rules.