Building on India’s property market

With sales figures continuing to be sluggish for more than a year and the volume of unsold housing stocks piling up, developers across India are under pressure to reduce their inventories. Although builders are holding to their prices despite the slump in demand, they are rolling out innovative offers to woo homebuyers. Some of them are even giving discounts for bulk deals or high-value transactions in select markets.

Innovation is key
From offering free club memberships and custom-made interior design to doing away with annual maintenance charges,  developers are going the extra mile. “We are under pressure to offload stocks and we have already issued an advisory to all our members to give the best deals to customers, either by way of offers or lower rates,” says Lalit Jain, Chairperson, Confederation of Real Estate Developers’ Associations of India (CREDAI), the umbrella body of developers in the country.
After the monsoon lull from June to August, developers are now gearing up for the festive season that commences with Onam in Kerala and the  Ganesh Festival in Maharashtra by offering these special deals. “Where we would get no more than ten enquiries over a  weekend during the lean season, we have been flooded with more than 100 enquiries over the last couple of weekends,” says a spokesperson of IndiaBulls. The realty major has rolled out a scheme where buyers pay just 15 per cent of the total on booking and 5 per cent on possession. The customer pays no EMI and no interest for the next two years till his property is ready, and yet gets the benefit of appreciation on the entire amount.
Other builders are also designing offers which allow homebuyers to commit minimum funds and get maximum benefits of booking early. “It adds up to an interest-cost benefit of thousands, when compared to the usual payment mode of staggered instalments at every stage of construction,” says realty consultant Sunil Bajaj.

Attractive benefits
There are also buy-back deals being offered by some developers such as the Shah Group inNavi Mumbai, which promises to not only buy back the property from the homebuyer or investor at a pre-determined rate after a fixed period, but also assures a profit margin on the invested amount. “We are able to make this unique offer because we were the first to build a land bank in the upcoming node of Kharghar. The company is also enjoying a healthy financial position after the sharp appreciation of land prices over the years. We are only passing on the benefit to the customer and making it a win-win situation for the buyer, whether prices go up or not in future,” says Nalin Shah of Shah Group. There are also plain-vanilla festive offers on every booking — from a 10g gold coin gift to household appliances and vehicles.

Discounts rule
While these offers have many takers, cash discounts still remain the most attractive for homebuyers. Although discounts depend on the locality, type of construction and the current stage of completion of the building, developers are waiving off between Rs200 (about Dh13) to Rs2,000 per square foot. “Many of the current discounts are genuine and homebuyers are smart enough to know this since they track the prices quoted by the builder,” says Bajaj.
Similar offers are seen in other parts of India, especially in the South Indian markets. “South India’s residential market has been following the ‘affordability’ mantra, with more than 80 per cent of the new launches being priced under Rs4,000 per square foot. Having shown resilience during times of uncertainty, it is imperative for developers to ensure prudent pricing strategies in the coming quarters to
remain competitive as well as sustain the momentum that they have gained during early 2012,” says Anuj Puri, Chairman, Jones Lang LaSalle India, adding that the focus of Indian real estate is shifting from Tier I to Tier II cities, and the southern region is also doing the same, with secondary hubs developing in Kochi, Coimbatore, Visakhapatnam and Mysore.
Housing finance companies are also lining up special offers and home loans. Market leader HDFC has unveiled a TruFixed loan which gives the customer an option to fix the rate for a period ranging from three to ten years, and then switch to a floating rate for the remaining tenure.
Under the new scheme, rates are 125 basis points lower than HDFC’s existing fixed rate loans. Home loans of up to Rs1 million are available at a fixed interest rate of 10.75 per cent and loans above Rs1 million and up to Rs7.5 million at 11 per cent.
In comparison to floating rate loans, the Trufixed loans between Rs1 million and Rs3 million are 50 basis points higher, but given the environment of rising rates, Trufixed offers the borrower the option of locking the rates for now and switching to the floating option during a lower interest-rate regime. 
Other housing finance companies too are upping the ante to woo customers. While SBI and IOB have cut rates, others such as Central Bank and IOB are also expected to follow suit. “After the recent RBI rate-cut and a nudge from finance minister P Chidambaram, banks and home loan companies are shaving their margins and giving special deals to the customers,” says Bajaj.