Realty developers turn to sops to attract homebuyers amid slump3 min read . Updated: 15 Mar 2013, 12:32 AM IST
Developers are offering hefty price discounts on properties, gifting cars and home appliances to prop up sales
Mumbai: Real estate developers, brokers and marketing agencies have begun bombarding customers with unsolicited emails, text messages and phone calls to prop up sales in a sluggish market, which consultants believe is unlikely to pick up in the near term. Not only are they offering hefty price discounts on properties but some are also bundling cars, home appliances, cash and non-cash discounts.
Sample this unsolicited email advertisement sent to a Mint reader, who did not want to be named, on 13 March by property broker Capital First Ltd on behalf of Ekta Parksville by Ekta World Ltd. It read: “Premium homes starting from ₹ 30 lacs onwards, pay just 20% now... No EMIs (equated monthly instalments)/interest till possession... Also available scheme with assured gift—Nano car*/home appliances*..."
Cash discounts are not given directly by well-known developers in Delhi, according to Aditya Verma, chief operating officer and executive vice-president of Makaan, part of People Interactive Pvt. Ltd based in the National Capital Region (NCR).
Developers in the smaller cities offer a 3-8% discount if consumers bargain, he said. “These are developers who typically offer an unrealistic promise of 15-20% returns in a few years," he said, adding non-cash benefits typically include furnished houses or free parking allotments.
Reports from real estate consultancies such as Kotak Securities Ltd, Knight Frank and Jones Lang LaSalle, India suggest that real estate developers are pulling out all the stops since project delays are only adding to their woes by increasing the cost of unsold properties.
Institutional equities research company Kotak Securities maintained a cautious stance on the real estate sector and expects a near-term correction in some markets in a 22 February report.
Home buying in Mumbai, India’s biggest real estate market by value, is estimated to have dropped by more than 62% in 2012 from the 2007 peak, according to Knight Frank’s February report.
Sanjey Roy, vice-president, corporate communications, DLF Ltd, said the company does not offer cash discounts to lure customers".
Other developers see pricing as key. “We have priced our properties competitively. The tie-ups with 10 banks also help customer who can avail construction-linked loans," said Kamal Taneja, managing director of TDI Infrastructure Ltd, based in Delhi.
Are discounts working with buyers?
“Many people would readily opt for properties which are aggressively-priced as they feel they are getting a good deal," said Om Ahuja, chief executive (residential services) at real estate consultant Jones Lang LaSalle, India.
However, prospective buyers such as Viren Shah, 38, a senior manager with a textile machinery company in Mumbai, are not taking the bait easily.
He acknowledged he gets “a lot of emails and calls typically saying ‘attractive investment opportunity’ to invest in properties but I cannot afford it at the rates they are quoting". Ahuja said due diligence should be carried out before making an investment and buyers should not “get carried away by fancy brands and promises of unrealistic returns".
For instance, Antony Philip, 34, an employee of Vital Electronics and Manufacturing Co., bought into a project that was eventually delayed by almost two years. “I had to shell out 50% more than the promised project cost," he said, without naming any builder.
India Ratings said in January that while residential demand was stable, demand drivers were weak. “For the 12 months ended September 2012, revenue (of the real estate companies covered by India Ratings) was 8% lower than that observed in the 12 months ended September 2011," it said in the report.
Will a price correction help?
“One might see prices in Mumbai soften, but cities like Bangalore will not witness any correction," said Samir Jasuja, founder and CEO, PropEquity, a real estate research company. “Also, the rate of appreciation of the last three years in prices will not be witnessed. Only certain pockets of certain regions would appreciate that high. However, if the developers launch projects at the right price points, the take-up rates would certainly improve."
Even the India Ratings report cited above said prices “remained firm in most cities", indicating that “demand is shifting in favour of lower-ticket size housing".
Consequently, companies that are catering to the low-cost housing demand claim to be seeing positive results.
“The current slowdown in the market has increased the demand for low-cost and affordable housing," said Rajeeb Dash, marketing head at Tata Housing Development Co. Ltd. “Simultaneously, the decline in the value of the rupee has increased property investments by NRIs (non-resident Indians) in the premium housing segment."