Ramesh Pathania/Mint
Ramesh Pathania/Mint

Should you go for festival season realty offers?

This festival season, it is raining discounts in the real estate market. But before you go for them, know how to evaluate their real worth.

These days websites, newspapers, malls and retail outlets are all flooded with offers for customers. Real estate developers, too, are part of the festival season offers. In the past few years, home sales have been low, even during the festive seasons. According to PropEquity, a real estate research and analysis firm, sales have gradually reduced during the fourth quarter (Q4) of a calendar year across the country in the past 5 years. For instance, in Delhi National Capital Region (NCR), 24,232 units were sold in Q4 2012, compared to 7,916 in the same period last year, a drop of about 67%. In Mumbai Metropolitan Region (MMR), sales were down by about 39% from 25,402 units to 15,523 sold in the same period. Bengaluru, Chennai, Hyderabad, and Kolkata sales were down by 44%, 33%, 60%, and 22% respectively. 

Some experts, however, believe there is pent up demand in the market. “Actual homebuyers are there, and they are looking forward to buying the right property at an affordable price," said Vikram Goel, chief executive officer, HDFC Realty, the property advisory arm of HDFC Ltd. They say festival offers benefit homebuyers. “The festival season is always a good time to go home shopping. Developers understand the importance and create specific offers, which reduces customers’ cost of buying," said Ankur Dhawan, chief investment officer, PropTiger.com, a realty portal.

This year, you may see some new offers in real estate, thanks to implementation of the Real Estate (Regulation and Development) Act (RERA), 2016, as well as Goods and Services Tax (GST).

Here’s a look at some of these offers. 

Till a few years back, developers used to launch new housing projects during the festival period; ready-to-move-in apartments were not offered. 

According to RERA, from August 2017 onwards, only those properties can be sold or advertised that are registered under the Act. But those properties that have an Occupation Certificate (OC) or have applied for it, are excluded from this mandatory registration. OC is given to properties that are ready to move in.

Developers are also keen to clear their inventory. Homebuyers, too, prefer ready houses and realty portals are focusing on such demand. In August, HDFC Realty had offered ready-to-move-in apartments in MMR. “We got good response from homebuyers, and are about to launch similar options in Delhi NCR soon," said Goel. 

If you are keen to buy a house, look at ready units even if they cost a little more because construction delays are a chronic problem. Plus, ready properties give a clearer idea of what you are buying in terms of factors such as space, location and view. 

Ready-to-move-in options not only avoid the risk of delay due to construction risk and provide immediate possession, they can also help you save on taxes—at least that’s what developers are advertising, since GST (12%) is applicable only on under-construction properties. “Currently, several developers claim that their apartment prices exclude GST. While it may be true in some cases, buyers should read the fine print," said Surabhi Arora, senior associate director-research, Colliers International India. Ask for proof. Only those properties that have an OC or completion certificate (CC) are considered complete and do not attract GST. Ask the developer for these as proofs. 

But tax is not the only thing to look at. Also look at other necessary factors as buying a house is a long-term investment.

Many developers are taking the online route. For instance, Puravankara Ltd, a Bengaluru-based real estate developer, held an online festival sale for 3 days (15-17 September 2017) during which, it says, properties were offered at lowest price points.

Real estate portals are doing the same. Housing.com (a part of Elara Technologies Pte. Ltd, which also owns Proptiger.com and Makaan.com), along with developers, will soon launch Home Utsav, an online realty festival in which consumers can avail offers such as innovative payment plans, rent-back opportunities (where the builder pays you rent), free interior packages, and interest rate offset till March 2018 (where builder pays loan interest on your behalf), said Dhawan.

Apart from the new offers, subvention and part-payment schemes continue from earlier years. Under a subvention scheme, the initial payment, or down payment, is deliberately kept low. Under a part-payment scheme, a part (usually 10-30%) has to be paid initially, and the remaining is typically divided into two parts—one is scheduled halfway through construction and another at the time of possession.

“Developers are still offering part-payment schemes, though subvention schemes are far less this year," said Anuj Puri, chairman, Anarock Property Consultants.

“Among the most common offers this season are free air conditioners in all rooms, modular kitchens, 1-year free maintenance, assured rent for 1-2 years, and no floor rise charges," said Puri. 

While affordable housing projects are seeing some interest from buyers, there are few takers in the luxury segment. So, “developers of luxury projects, particularly, are offering heavy discounts since sales are sluggish in this segment. Some are offering high-end cars for those who book penthouses, and luxury cars to those who book villas. Some are also offering 12 months’ assured rent," he added. 

In some examples, it is cash discount instead of freebies. For instance, Tulip Infratech Pvt. Ltd, a Gurugram-based real estate developer, is offering 10% discount on the list price of 4- and 3-BHK apartments till October end in one project. Mumbai-based Sheth Corp. is offering a “RERA-registered project" in Mulund until end of September at a flat rate of Rs1.62 crore and Rs2.14 crore for 2- and 3-BHK apartments, respectively, with no floor rise cost. It is also offering 10:80:10 schemes—buyer pays 10% upfront as down payment, 80% during construction and the remaining 10% on possession.

Look for a property that suits your requirements. Freebies and offers should be incidental to the decision. Look at the project’s location, features and amenities, quality of construction, and the quoted price; and compare these with other options in the vicinity. If the project is at par with peers on all these counts, then offers and freebies make sense. “The merits of these offers must be weighed against the more intrinsic values of location, developer’s delivery track record and reputation for quality," said Puri.

Ideally, one should evaluate all freebies and offers in terms of money. Instead of accepting these, negotiate for cash discounts. “Currently, it is a buyers’ market and some of these schemes will not only benefit buyers but also developers who are looking to improve sales—post demonetization and RERA," said Arora.

Look for RERA-registered properties. If not that, then “look for properties where prime lending institutions are providing loans," advises Goel. 

Take the help of a lawyer to check the papers of the property. If you take a loan, the lender will also do its due diligence.