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

HT Estates - - HTESTATES - Ramesh Nair

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.

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