How to attract fence-sitters
From 20:80 to interest waivers, builders are going all out to woo the Indian homebuyer who is yet to take a decision on buying property
The residential real estate market continues to remain lacklustre, and unsold stock is piling up. In response to the unrelenting sluggishness in the market, many residential developers have been offering various schemes to entice fence-sitters.
Some of t he popular schemes used by developers include:
20: 80/ 10: 90: 10/ 8: 92/ 5: 95 schemes: The most popular schemes include 20:80, 10:90:10, 8:92 and 5:95 schemes. Also known as subvention schemes, buyers opting for these are only required to pay an amount equivalent to the smaller number of the ratio. The rest is funded by a bank after it has approved the borrower’s eligibility.
Equated monthly instalments (EMIs) start either on possession or after such specific period as mentioned by the developer. Registration of the property is compulsory in these cases.
In a variant of the above scheme, clients pay 5% to 10% of their own funds, and the financial institutions lends up to 70% of the amount, which is construction-linked. The balance 20% is contributed by the buyer, but EMIs start immediately upon disbursement of the loan.
These schemes remain a good selling tactic for developers; more so in areas with an over-supply of units in affordable projects. These schemes are particularly attractive to end- users, and have been quite successful in swinging irresolute buyers towards a purchase commitment. Most projects offer these s chemes i n t he pre- launch or launch stages, and they are a good way for developers to raise money for construction.
What buyers need t o know while opting for such schemes is most developers in these charge higher per square feet (psf) prices compared to the rates offered in construction-linked payment schemes. This is because the developers need to pay interest to banks, and therefore charge customers a premium to compensate for this.
20:80 scheme (without bank funding): A variation of these subvention schemes is the 20:80 scheme without bank funding. In this, a buyer needs to pay 19.9% of the total contribution, and will pay the balance 80% on possession or after such specific period as mentioned by the developer. Registration may or may not be compulsory in these projects.
This scheme appeals to investors and buyers not requiring bank loans.