Mumbai/Bengaluru: With fewer people buying residential apartments in the wake of demonetisation, developers have started offering home buyers assurance of adjustment or compensation if prices go down.
According to developers, the assurances are aimed at prompting clients who were preparing to buy a house but are now waiting for a correction in property prices. Demonetisation and worries over further clampdown on black money have led to a 40% drop in enquiries and sales of real estate across key markets of Mumbai, Delhi, Bengaluru and Pune.
Deals in the secondary market have come to a standstill, with both buyers and sellers waiting for clarity, while in the primary market developers are looking to prompt fence-sitting homebuyers.
Prakkash G Rohiira, director, Karma Realtors, a property brokerage operating in Mumbai, said most homebuyers are in a wait-and-watch mode because they expect prices to come down. “This expectation is drawn out of confusion, and not out of clarity.
Realty developers are trying to provide stimulus to the market with price-guarantee schemes so that the market gains momentum. Enquiries for projects offering price guarantee schemes have improved over the last few days,” Rohiira said.
In Mumbai, various developers, such as Lodha Group, Runwal Group and Oyster Living, are offering these schemes. Runwal Group is offering price assurance schemes at three of its projects — Runwal Greens, Runwal Bliss and Runwal Forests.
Several developers are offering the scheme in the National Capital Region as well.
Lodha Group is offering price assurance scheme on some of its projects and is of the view that demonetisation will prove to be positive for the real estate sector, as it will lead to lower interest rates and EMIs, along with higher transparency. “With reduction in interest rates of anywhere between 1% and 2%, EMIs will go down by 10-15%, which will be a massive boost to all consumers. We are confident prices will not go down.
On the contrary, demand for good quality development by Grade A developers will increase. To give customers the confidence that we actually believe in this, we are happy to provide a guarantee that there will be no such reduction in prices, and if in the next three months there is any, we will pass on the benefit to them,” said Abhishek Lodha, MD, Lodha Group.
Likewise, most mid-segment builders in Bengaluru, including Citrus Ventures, have started offering price guarantee payback schemes if the prices drops. “There is a trust deficit amongst home buyers. These kinds of schemes will make developers little more accountable,” said Vinod Menon, CEO of Citrus Ventures.
“In case, the prices move up, we will cap it rather than going for an upward revision.” However, not everybody is enthused by price assurance offers. Ashwin Chawwla, CEO with an online property portal, is of the view that most buyers will take such assurances from builders with a pinch of salt.
“Capital protection is untested so far. There may be low interest from buyers due to trust deficit on builders and there could be resistance from home buyers on such schemes.
We are working on a scheme where buyers can offer their quotes for the projects through an auction mechanism that can get concept of maximum retail price (MRP) out,” Chawwla said. He added that his portal had formed alliance with 40 tier-I developers to offer homes through its auction scheme.
Credits ET Realty