Realtors back with festive offers, will that bring boost sales?

It’s raining discounts for property buyers, again.

With the festival season kicking off, from free gold coins to iPhones, cars to modular kitchen, and discounts up to Rs.5 lakh, developers have lined up various offers to attract prospective buyers to boost sales. The festival season—October to December—used to bring in maximum sales for developers, as much as 25-30% till a few years back. But since the slowdown hit the real estate sector, sales have been declining leading to an inventory pile up across large cities.

Developers have been focusing on clearing the existing backlog rather than bringing in new supply into the market and are in a race to offer additional discounts and offers, said an executive from a real estate firm requesting anonymity. The sentiment is still muted across the eight tier I cities. Ahmedabad, Hyderabad and Kolkata showed improvement in sales with a growth more than 20%, while Pune, Chennai, and Bangalore witnessed sales decline of 8%, 4% and 3%, respectively.

The frenzy of discounts can be gauged by umpteen hoardings and advertisements across the National Capital Region. And apart from the offline sales strategies, even the online space has been buzzing with activity. E-commerce firm Snapdeal ran the Unbox Diwali real estate sale between 2 October and 6 October with apartments in the price range of Rs.30 lakh-Rs.5 crore with developers mainly from Mumbai and south India participating in it.

Another e-commerce company, Amazon India, announced a partnership with developer Brigade Group under which a lucky winner will get a 2-bathroom-hall-kitchen apartment free in Diwali who shopped during the Great Indian Festival Sale between 1 October and 5 October. However, according to A.S. Sivaramakrishnan, head-residential services India, CBRE South Asia, the real estate market is driven by fundamentals—good location, pricing, quality and developer’s track record.

“If fundamentals are good, the offers and freebies work. Nowadays, buyers are doing their due diligence and are being selective when it comes to buying a property. These things (offers) will definitely entice buyers provided they are backed by strong fundamentals. We see marginal improvement in sales in most of the markets in the second half of this year,” added Sivaramakrishnan.

According to Pankaj Kapoor, founder, Liases Foras, the inventory level across eight large cities has been rising.

For the first quarter of 2016-17, the unsold stock stood at 1,191.4 million sq. ft compared with 1,017.2 million sq. ft in the first quarter of 2015-16. The inventory level in terms months stood at 38 across these cities in the first quarter of the current financial year compared with 41 months in first quarter financial year 2015-16. An efficient market maintains 8-12 months of inventory, said Kapoor. Snapdeal even offered home loans through State Bank of India apart from a 10% discount on the base selling price and other freebies.

A recent interest rate cut announced by the Reserve Bank of India is also expected to bring in good news for the real estate industry. “Any cut in the interest rate enhances eligibility for buying a property as it brings down entry costs. Moreover, the prices have more or less remained stable over the last two years while there has been an increase in affordability of salaried people. It is definitely a good time to buy,” Sivaramakrishnan said.

Sales increased 9% year-on-year for the first quarter of financial year 2016-07, while sequentially the numbers came down a little, as per the first quarter report by Liases Foras.

“Due to massive volume of unsold stock, developers are now focusing on offloading the existing units rather than adding more supply. Also, due to uncertainty revolving around the applicability of Real Estate Regulatory Act, developers have adopted a wait-and-watch strategy. Buyers have been choosing to exercise caution since many quarters,” Kapoor added.

Credits VC Circle

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