As property developers grapple with a slowing market, they have started offering freebies and monetary incentives to attract customers to buy homes.
The incentives range widely. Developers are giving freebies such as free parking space, and even paying a part of the equated monthly instalment (EMI) on home loans. Other popular options are electronics and furniture at discounted rates. These freebies are offered for a fixed duration of about six months after a project is launched.
Volumes in the property market have almost dried up in recent times, mostly because of the spiralling property prices and increase in interest on home loans. Interest rates for home loans have increased from 7.5% two years ago, to 12.5% now, making it costly for buyers to purchase homes on borrowed money.
Express Garden in Indirapuram is among the recent crop of projects that offer added benefits to attract buyers
Although markets such as New Delhi and its suburbs of Gurgaon and Noida have seen a price correction in the 10-15% range, developers do not want to reduce the prices, as they do not want to establish a new lower price. Instead, they have chosen to offer freebies to attract buyers.
“We offered parking free for six months after we launched our project, Express Garden in Indirapuram near Delhi,” Vinay Goel, managing director of New Delhi-based developer Express Builders Ltd, said. The free parking space offered by Express Builders helped the company in marketing the project. Around 85% of the project, which was launched in 2005, has been sold.
While offering freebies is an additional cost for the builder, it helps the developer in differentiating the product. “See, people do compare products. If two developers are offering similar products, there needs to be some additional incentive,” Goel said.
Financial incentives are among the most common freebies that are being offered. For instance, a few developers have partnered with banks to offer schemes where the bank gives the buyer 90% of the cost of the house as a home loan. Normally, loans are 80-85% of the cost of the house.
Bangalore-based developer Vakil Housing Development Corp. has tied up with HDFC Bank Ltd and Axis Bank Ltd to offer a scheme under which if a customer approaches either of these banks to procure a home loan, the banks will release the full loan amount at the time of registration. This is unlike other housing loans where banks disburse the loan amount in instalments.
“We have offered the advance disbursement scheme to customers in the last two months for our villa project— Vakil Hosur Hills—for villas priced between Rs30 lakh and Rs45 lakh,” said Mohammed Ali Vakil, director, Vakil Housing. “The customer need not pay the pre-EMI interest that is charged on partial instalments through this scheme. It translates into a saving of 10%, so on a villa costing Rs30 lakh, the customer will save about Rs3 lakh,” he added.
Another Bangalore-based developer, Akme Projects Ltd, has tied up with HDFC Bank, ICICI Bank Ltd and Centurion Bank of Punjab Ltd to offer prospective buyers home loans right at the venue of the project launch.
“The banks put up stalls at the venue of the project launch,” Anil Nanda, chairman and managing director of Akme Projects, said. “The customer can get the loan directly from the banks right there.” In this case, the loan is sanctioned within 24 hours, whereas it normally takes a week to get the loan.
Akme has also tied up with an electronic goods company and a furniture supplier to offer its customer their products at a 15-25% discount. It procures these goods from the companies at a discount and this discount is passed on to the home buyers.
The company has started offering this scheme for two of its group housing projects, Akme Ballet and Akme Encore in Bangalore. “We are offering television sets that cost Rs80,000 at Rs60,000 to our customers,” Nanda said. “So far, we have sold 32 plasma televisions and more sales are happening.”
According to Nanda, home buyers have become choosy and such incentives help in creating a goodwill among customers. “When it comes to property buying, word of mouth publicity really helps, and such incentives will help in attracting more buyers,” he added.
Larger developers such as Omaxe Ltd also plan to enter the fray. “We have to follow the industry,” Arvind Parik, chief financial officer of Omaxe, said. The company is looking at giving away overseas trips to the first hundred buyers.