Sale of ready-to-move houses key for builders to tide over cash crunch
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Builders want to encash unsold, ready inventory as early as possible, given almost everyone is facing a cash crunch now. Financial institutions are not giving money and NBFCs are rarely sanctioning loans. RAJAN BANDEKAR, president, Naredco, Maharashtra
Builders caught in the cash crunch are offering discounts and customized payment plans to ignite sales of ready-to-move homes, aiming to reduce inventory, bring down holding costs and generate cash flows. Selling ready homes will be critical for developers with unsold inventory this year, as the real estate industry plods through a multiyear slowdown.
In a bid to revive buyer sentiment and boost sales, National Real Estate Development Council (Naredco) last week launched a web portal (Housingforall.com) displaying ready-to-move properties with occupation certificates.
“Builders want to encash unsold, ready inventory as early as possible, given almost everyone is facing a cash crunch now. Financial institutions are not giving money and NBFCs (nonbanking financial companies) are rarely sanctioning loans. The portal addresses this and makes it easier for customers to buy a ready home without any risk,” said Rajan Bandekar, president,
Naredco, Maharashtra. Prices of residential apartments have remained stagnant for long, even declining in many cities. Prices of ready homes, typically higher than under-construction homes, have not risen either, though they come with fewer risks.
Gurugram-based M3M Group, which builds premium projects and is currently developing a Trump Tower in National Capital Region (NCR), clocked ₹524 crore of sales in December, of which ₹320 crore came from its two ready luxury projects.
Pankaj Bansal, director, M3M Group, attributed the good response to its dedicated campaign to reduce ready inventory and customized payment plans. “Developers have the option of slashing prices by 10-15% but customers are still not buying. We offered 10% down payment and no EMI for a year, which converted to sales,” he said.
Rajeev Talwar, CEO, DLF Ltd, said selling ready homes will revive customer confidence and developers need to sell them, and not hold on.
“Developers today depend on home sales to generate cash flows, where they get the down payment while buyers get a concession. DLF anticipated a seller’s market coming in soon, and the current need and demand to sell ready homes in the sector reinforces that. It would benefit developers if they moved towards selling only ready homes,” he said.
Unlike most developers, DLF now follows a build-and-sell model, based on the strategy that it will not sell until it is completed. It is now selling ready homes in its core Delhi-NCR and Punjab markets.
BUYERS SHOWING INTEREST
With buyers showing interest in ready homes, inventory levels declined 12% during the December quarter from a year ago, said a Proptiger report in January. From 883,000 unsold housing units at the end of the same period last year, unsold stock fell to 775,000 in Q3 FY20.
Mumbai and Pune together contribute 57% of this unsold stock.
Half of the units in this stock are affordable homes, priced below ₹45 lakh.
Mumbai-based Wadhwa Group has four projects in central and western suburbs costing ₹2-4 crore, which are ready or nearing possession.
The developer says it gives customers breathing space of six months to a year before they have to start paying EMIs.
“For ready homes, buyers pay importance to the locality and project and the amenities and lifestyle it offers rather than the developer. However, for underconstruction units, the credibility of the developer is important,” said Bhaskar Jain, head of sales and marketing, Wadhwa Group.