BackHouse purchase: Should you go for developer discounts and offers?
Developer are launching new offers to attract homebuyers given that sales plummeted during the covid-19 lockdown
PremiumSales in the residential real estate sector plummeted during the covid-19-triggered lockdown and it’s unlikely it will pick up anytime soon, with people witnessing deep pay cuts and job losses happening across sectors.
“Residential sales more than halved during the lockdown period," said Anuj Puri, chairman, ANAROCK Property Consultants.
To counter this trend, developers are coming out with new offers to attract homebuyers, but given that most developers are facing cash flow problems, it is important for you to understand their ability to fulfill the promise.
Let’s understand what are the offers and should you go for them?
The offers
Generally, we see developers come out with offers during the festive season but this time the covid-19 crisis has forced them to roll out new offers to attract buyers sitting on fence.
“Sales have been severely impacted due to the pandemic and, hence, developers are offerings various schemes with waivers of charges such as stamp duty and registration fees as well as innovative payment schemes to attract buyers," said Dhruv Agarwala, group CEO, Housing.com, Makaan.com and PropTiger.com.
“To overcome issues like inventory pile-up and cost overruns due to the lockdown, various developers are coming up with innovative offers. Refundable booking amounts, cashback schemes and freebies on booking are some of the popular offers on the table. For instance, there is a scheme wherein a customer can book a property by paying ₹1 lakh and pay the remaining booking amount over the next 100 days. He can even cancel the bookings within 90 days with full refund. In another scheme, there is a cashback offer of 5% of the property cost if it was booked during the lockdown period," said Puri.
Many of the developers are starved for cash. The real estate sector has been doing poorly over the past few years. In the January to March quarter, sales in the residential sector dropped by 25% compared to the previous year, according to a report by PropTiger. Sales have been pushed down further during the lockdown.
With poor cash flows, developers may find it difficult to service some of these schemes.
“There is no denying that some developers are facing a cash crunch and may find it challenging to support some of the attractive payment schemes on offer. A buyer, thus, needs to be careful and do due diligence on the financial capability and track record of the developer," said Agarwala.
Should you go for them?
It is important for homebuyers to read the fine print before going for any of these offers. “Homebuyers must tread with caution and read between the lines. Besides usual project and document verification, for instance, they must also check the cancellation clauses in case they decide to cancel the bookings later on. Also, the earlier ban on subvention schemes makes it even more important for homebuyers to verify the scope and means of a scheme," said Puri.
In July 2019, the National Housing Bank (NHB) advised housing finance companies (HFCs) to desist from providing loans to finance subvention schemes offered by builders to sell homes. Therefore, check the details carefully.
“If something looks extremely attractive to the homebuyers, it may not necessarily mean it is profitable to the developers. Homebuyers should read through the fine prints and verify the promises made by the developers," said Shveta Jain, managing director, residential services, Savills India.
Prefer cash discounts. “Homebuyers can look for both upfront cash discounts or else discounts in club membership charges, external development charges or other charges which may be accounted for in the total cost. Flexibility and customization in payment plans is another good way of seeking pricing advantage and it can be a win-win for both the buyer and the developer," said Jain.
Buying a house is usually the biggest expense of a lifetime. Don’t rush into it just to bag that attractive deal.
In fact, if you can afford it, go for a ready-to-move-in house to avoid the risk of delay in execution.
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