Do free­bies work in sell­ing prop­erty?

Not all in­cen­tives hit the mark, be­cause not ev­ery type of buyer can be tempted with free­bies. The In­dian mid­dle-class is price-sen­si­tive and the cur­rent buzz­word in the mar­ket is ‘cor­rec­tion’

HT Estates - - Front Page - Sha­jai Ja­cob

The type of mar­ket­ing strate­gies that In­dian de­vel­op­ers em­ploy to sell their prod­ucts in a tough mar­ket may of­ten seem strange to prop­erty mar­keters in other coun­tries. Nev­er­the­less, these mar­ket­ing strate­gies are based on a deep un­der­stand­ing of their tar­get clients – as var­ie­gated as the In­dian real es­tate mar­ket it­self. In In­dia, the as­pi­ra­tional quo­tient can­not be un­der­es­ti­mated and can of­ten be cap­i­talised upon. Cer­tain add-on of­fer­ings, or free­bies, of­ten ap­pear to have no log­i­cal con­nec­tion to the ac­tual con­sid­er­a­tions prop­erty buy­ers would have. How­ever, they ad­dress well­re­searched ‘points of at­trac­tion’ within their tar­geted cus­tomer base.

This dy­namic is es­pe­cially true in the case of the noveau riche class of buy­ers, but can ap­ply equally to cus­tomers com­ing from es­tab­lished wealth. In In­dia, as in most other coun­tries, a plush for­eign car val­i­dates the fact that the own­ers have fi­nally ‘ar­rived’ – a mes­sage which the buyer of a lux­ury home also wishes to con­vey to oth­ers. Like­wise, gold is a highly ac­cepted and cov­eted as­set of ap­pre­ci­a­tion that ap­peals di­rectly to the In­dian senses. For­eign travel still main­tains suf­fi­cient glamour to at­tract at­ten­tion as a value-added of­fer­ing pack­aged into a prop­erty deal.

Of­ten, such of­fer­ings meet with a level of suc­cess that for­eign mar­ket an­a­lysts are chal­lenged to ex­plain. This is be­cause they are per­ti­nent to a highly-in­di­vid­u­al­is­tic na­tional psy­che, and are usu­ally played out at times of the year when the coun­try’s prop­erty buy­ing sen­ti­ments are at their tra­di­tional peak.

Not all of these in­cen­tives hit the mark, be­cause not ev­ery type of buyer can be tempted with ‘free­bies’. The In­dian mid­dle-class is a highly price-sen­si­tive one, and the cur­rent buzz­word in this mar­ket seg­ment is ‘cor­rec­tion’. These buy­ers, who are on the mar­ket for homes cost­ing be­tween R35 lakh and R75 lakh, have an ea­gle eye on the fi­nal bot­tom line and have been primed for a pos­si­ble re­duc­tion in prices. In fact, such a re­duc­tion has been long awaited in the pri­mary cities.

Given the high de­mand for mid­in­come homes in cities such as Mum­bai, Pune, Ban­ga­lore and Delhi-NCR, whether such a cor­rec­tion will come at all is a big ques­tion mark. In most cases, de­velop- ers have the fi­nan­cial where­withal to stay firm on their of­fi­cial mar­ket prices. They see lit­tle sense in mark­ing down their price tags and pos­si­bly sig­nalling what, from the buy­ers’ per­spec­tive, is a long over­due cor­rec­tion.

The al­ter­na­tive strat­egy is of­ten to an­nounce in­cen­tives. How­ever, be­cause the base pric­ing of the units in these projects re­duces their mar­gins, these in­cen­tives tend to be far from ex­trav­a­gant. For in­stance, a hi-fi sound sys­tem or a mi­crowave oven as an in­duce­ment to buy a 2BHK in the sub­urbs of Mum­bai is un­likely to work for a bud­get­con­scious buyer who is more con­cerned about the im­pact his EMIs will have on the fam­ily bud­get. Free­bies only work in the mid­in­come hous­ing seg­ment if they ac­tu­ally add value to the prop­erty or lighten the fi­nan­cial burden on the buyer in some way.

Con­versely, the mar­ket­ing tac­tic of of­fer­ing life­style-ori­ented free­bies is of­ten quite ef­fec­tive when it comes to high-end pre­mium homes. Thanks to the con­sid­er­ably higher base price and the pro­por­tion­ately bet­ter pur­chas­ing power of the tar­get clien­tele, de­vel­op­ers can af­ford to raise the ante on the add-on of­fer­ings. In cases where there are two or more lux­ury home projects of more or less equal at­trac­tive­ness in a sin­gle lo­ca­tion, these free­bies can be­come very de­ci­sive dif­fer­en­tia­tors. High-net-worth buy­ers eval­u­at­ing all avail­able op­tions of­ten re­spond to the cake with bet­ter ic­ing, given that they in­tend to buy one cake or the other any­way.

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