Don’t let offers sway your house buying decision
Customers are resetting their expectations to buy homes given that the cost of borrowings have gone up,” Goenka added.
On the project financing front as well, there will be delay in financial closure and refinancing of projects.
While earlier commitments were being honoured, new projects and new financing were becoming slightly challenging.
“There will be overall slowdown in terms of growth in the real estate market. We are only left with two quarters and these are peak quarters for the sector. Sometimes 65-70% of the sales happen in these two quarters. The liquidity issue among NBFCs is going to significantly impact growth,” said Goenka.
The sector has already been facing a lot of headwinds before the new woes hit them.
Over the last four years, the sector, particularly the residential segment, has been reeling underpressure dueto weakmarket sentiment and slow demand, especially in luxury housing.
Coupled with slow pace in home sales, demonetization, the roll-out of goods and services tax (GST), and the introduction of new real estate regulations have severely impacted new launches and expansion plans of several developers in the past two years.
Home sales and new launches had just started picking up since the beginning of this year after a sharp fall in the previous year due to the lingering effect of demonetisation.
In the first six months of this year, home sales in the last eight cities have grown by 6% to 1.38 lakh units as compared to the same period last year.
New launches had almost doubled up to over 100,000 units in the first six monthsofthis year after a severe slump previous year.
Real estate consultants, however, are hopeful that while the liquidity crunch may further impact margins of developers, it may not have much effect in home sales or severely impact new launches.
“NBFCs contribute 50-55% of construction finance to the developers. There may be a bit of a slowdown in the construction of projects, but builders will have to find ways, especially customer advances, to take care of project funding. Margins have been under pressure because of the heavy cost of financing. Margins will be under further stress,” said Pankaj Kapoor, managingdirector, Liases Foras, a real estate advisory firm. Dharmvir Singh, an IT professional, is planning to upgrade to a bigger house at a better location. With most developers already out with their annual festive offers, he can easily settle for oneof the mostsuitable deals. “I have been getting calls from them now offering discounts and schemes so that I make a decision soon,” said Singh. Though some of the offers sound good, Singh wants to take his time to find a house that is just right for him.
Singh booked a two-bedroom apartment in Greater Noida West (earlier known as Noida Extension) in 2013 while it was under construction and got its possession recently. However, the 34-year-old, who works in Vasant Vihar and lives with his wife andchild in Vaishali, Ghaziabad, can’t think of moving into the house as it’s far from his workplace, is too small for his needs and has poor connectivity. “I wanttosell this apartment and buy a bigger house, which should also be closer to my office,” said Singh, who expects his mother to shift with him in a year or two.
Every year, around Diwali, developers come up with offers andschemestoattract buyers, in the hope of giving a leg up to the slow sales that the real estate industry is reeling under over the past few years. “We are optimistic that this season will improvethe sentiment andbring back fence sitters in the market,” said Surendra Hiranandani, CMD, House of Hiranandani.
DEALS ON PROJECTS UNDER CONSTRUCTION
Discounts and tax waivers
As per Magicbricks.com, a real estate portal, Dimple’s Group, a Mumbai-based developer, is offering discounts of up to ₹44 lakh to home buyers in its project, called 73 EAST, that is coming up in Kandivali West, Mumbai. The project offers twoand three-bedroom apartments at a starting price of about ₹1.7 crore. Another developer in Indirapuram, Ghaziabad, is offering various amenities free of cost, along with free car park- ing and waiver of the 12% goods and services t ax ( GST). Together, all these can bring down the cost by ₹30.57 lakh.
Puranik Builder is offering a discount of up to ₹10.95 lakh for its project named Abitante that is comingupinPune. Theproject offers 2- and 3.5-bedroom apartments at ₹60-90 lakh.
Lodha Group, a Mumbaibased developer, is offering to pay stamp duty and GST along with giving an early bird discount of ₹6 lakh to buyers who book an apartment in their under- construction project named Lodha Amara, located in Thane, Maharashtra.
Subvention and partpayment
Some developers offer subvention and part payment schemes, especially at the time of projects launches or for under-construction properties, round the year, while a lot of others start offering them specifically during the festive season.
“For newer launches, lower upfront payment and the remainder on possession are standard subvention schemes,” said Anshul Jain, country head and managing director, Cushman & Wakefield India, real estate consultants.
Under a subvention scheme, the initial payment or down pay- ment that a home buyer has to make to buy a property is deliberately kept low to attract more buyers. For instance, M3M Group, a Gurgaon-based developer, is allowing booking in their project, namedM3MSierra68, in Sector 68, Gurgaon, by just paying 5% of the apartment value; the remaining has to be paid at the time of possession.
In case of part- payment schemes, homebuyers have to pay the property cost in three or four parts. Usually, the first part of the payment is lower at 10-30% of the property value; another part is paid during the construction phase and the last part at the time of possession. For instance, Satra Group, a Mumbai-based developer is offering 10:80:10 subvention scheme in its project Satra Harmony, located in Chembur, Mumbai.
Other offers and freebies
Developers are also offering various other freebies, including gold coins, I-Phones and cars, at the time of booking. Some others are offering free air-conditioners, modular kitchen, furniture and so on.
DEALS ON COMPLETED PROJECTS
The declining sales volumes over the past few years has led to huge unsold inventory of readyto-move-in property. With chances of improvement in demand or price bleak, it doesn’t make sense for developers to hold on to them. “There could be new launches around this time, but developers are focusing on easing existing inventory,” said Hiranandani.
In order to clear such inventory, various developers are offering waiver of tax and other fees. “For existing inventory which is closer to completion freebies are accompanied by waiver of GST, stamp duty or registration charges or the additional costs over and above the basic cost of the apartment,” said Jain.
A lot of buyers too now prefer completed projects because of the uncertainty involved with under-construction projects. “We are witnessing strong demand for ready-to-move flats over under-construction ones,” said Hiranandani.
Realty portals are going hand-inhand with developers and providing them a platform to reach large number of potential home buyers. Housing.com, a real estate portal owned by Elara Technologies Pte Ltd, which also owns real estate portals PropTi- ger.com and Makaan.com, has announced its annual, online home shopping festival, Home Utsav 2018, from 1 October to 31 October, offering deals, offers and new features. About 150 developers and 500 channel partners will showcase over 350 projects in the event across India.
WHAT SHOULD YOU DO?
“Buyers should not be swayed only by packages and offers and do thorough due diligence on the project and the promoter,” said Jain. Like Singh, you should not let freebies and discounts drive your purchase decision. Buy only when you find a property that suits your needs.
“These offers can be rewarding if the customer has picked the right developer and project. White goods freebies make sense if the property itself is of inherent value to the buyer,” said Anuj Puri, chairman, Anarock Property Consultants.
You should be especially careful about financial schemes like No- EMI till possession, subvention schemes, part paymentsand so on. It’s important to understand these thoroughly to assess if it can benefit you. “They can be misleading if the financial schemesarenot transparent and the buyer does not read and understand the fine print,” said Puri.
Ideally, one should evaluate all the freebies and offers in terms of money. Instead of accepting a freebie, try and negotiate with the developer for cash discounts. “Straight up discounts on prices are definitely beneficial for buyers. In other cases as well, waiver of certain charges or certain freebies help keep the overall cost within the buyer’s budget,” added Jain.
“A price discount is the clearest and most decisive incentive that a developer can offer, but a buyer should focus equally on the value obtained and the money saved,” said Puri.
So before you consider an offer or scheme, find out the monetarybenefit that you would derive, avoid offers that you don’t need and insist that the developer adjusts the value of gifts in the property value. But most importantly, don’t look at real estate only because there are offers on the rack.
Every year, around Diwali, developers come up with offers and schemes to attract buyers
Customers are resetting their expectations to buy homes