The property market is unlikely to see any fireworks this Diwali given aspiring home buyers remain uncomfortable with prices. Although builders will try their luck with some new launches, it’s unlikely they’ll do brisk business. As Rohit Poddar, managing director, Poddar Developers, points out, widespread expectation that prices are headed south is dampening sales. Arun Tiwari, CMD, Union Bank of India, says home buyers feel there could be a correction in prices over the next four to six months. Tiwari adds that salaried employees, in particular, are holding back on purchases because they’re not confident they will get meaningful increments.
For their part, builders who are sitting on large inventories are hoping festive discounts and freebies will convert fence-sitters. At the last count, the unsold inventory across eight cities was seven lakh apartments, which could take four years to clear, according to a Knight Frank India estimate. But that’s not surprising since builders have been reluctant to drop prices, as a result of which buying a house has become virtually unaffordable. Currently, 69% of the unsold inventory in MMR (Mumbai Metropolitan Region) costs at least R1 crore per unit, with the weighted average approximately at Rs. 2 crore, a recent report by JLL India estimated. In comparison, the average salary earned in the city is a mere Rs. 7.5 lakh. As JLL sees it, typically the price of an apartment should be equal to roughly salaries earned over six years but today it could cost as much as 27 years of salaries.
Which is why Amit Bhagat, CEO at ASK Property Investment Advisors, believes that unless there’s a substantial price cut or a very attractive financial scheme, it’s going to be hard to sell. “Affordability is a critical issue today and no one will buy a house any longer for a 5% stamp duty relief,” Bhagat observes.
Having read the writing on the wall, some developers are offering direct price cuts.
But experts advise customers to bargain with the builder and not settle for the advertised price. Ashwinder Raj Singh, CEO, residential services at JLL India, says the offers are just teasers to tempt consumers to start negotiations. “Buyers can get heavier discounts if they discuss the purchase across the table,” says Raj.
Meanwhile, several developers have already rolled out their festive season offerings. DB Realty, for instance, is offering a straight cut of 18% for its 1200-1500 square feet apartments and a free parking slot at its DB Crown project in Prabhadevi, Mumbai. Omkar Realtors’ financial scheme for its Ananta Project at Goregaon allows the buyer to pay an initial amount of just 5%. The bank finances 80% of the cost and the remaining 15% needs to be paid only at the time of possession in 2017. Gaurav Gupta, director at Omkar, explains the company pays the interest on the bank loan relieving the customer of the burden of a monthly EMI until possession. “We have been able to offload 65% of our inventory thanks to this scheme,” Gupta says.
The mark-down is restricted not just to premium products but is also available on affordable housing. Poddar Developers is offering a waiver on stamp duty and registration charges, translating to an upto 8% reduction in prices. This has resulted in a 30% increase in enquiries, Poddar claims, though how many would be converted in a sale couldn’t be estimated just yet. Poddar Developers builds homes with a ticket size of up to Rs. 40 lakh in the suburbs of Mumbai.
Reliable sources mention that Delhi-based Bestech is also offering an 8%-10% reduction in prices for its New Gurgaon project while Supertech has offered buyers an apartment worth Rs. 20 lakh located on the Yamuna Expressway free with a purchase made at its high-end project in Noida, where the ticket size is a hefty Rs. 2 crore.
The new kid on the block, Piramal Realty, has announced a special price of Rs. 74 lakh for its Piramal Vaikunth in Thane until the end of September. Lalit Kumar Jain, promoter, Kumar Urban Development, said that while the company doesn’t have a particular schemes for the festive season, it is offering direct discounts that would see prices that are “substantially lower” than those seen a few months ago. Kumar refused to quantify the same.
Although the velocity of sales may not pick up in the next three months, some traction can definitely be witnessed in projects where the price is right and which are being developed by builders with a sound execution track record. In the past three years, Godrej Properties’ Gurgaon launch and L&T, Omkar’s Lower Parel launch saw stellar responses, selling out in a matter of days, on the back of the brand and competitive pricing.