When festival bells toll
Mar 26 2014
Gudi Padwa, Poila Boisakh and other feel good occasions are here and realty companies are looking to roll out the goodies
So buyers, this is your time, in case you are still undecided. Purchase your dream home now as developers are offering attractive discounts to lure customers – the more attractive, more the allurements.
The inducements to buyers range from cash discounts on upfront payments to assured tax benefits, customisation of flats, free home furnishings, free parking, club memberships, waiver on registration charges, interest subvention and various freebies like luxury cars and international holiday destinations. Developers are clearly leaving nothing to chance.
What has come as an added incentive is this: with the present slowdown in the real estate sector, discounts and freebies are raining. The Indian real estate market, especially residential real estate, has witnessed challenges in the form of poor sales and high inventory of unsold units.
However, even as developers struggle to boost sales, experts believe that it may be a good opportunity for consumers to rake in discounts available at the moment in plenty.
Gudi Padwa in Maharashtra is considered an auspicious day signifying new beginnings and is usually ear marked for major purchase decisions – hence many builders target this festival to launch their projects in keeping with the local sentiments during this period. In parts of eastern India, essentially Bengal and surrounding states, the mid-April Bengali New Year or Poila Boishakh is considered a good time to invest and buy, while down south, it is it Vishu time.
Little wonder that developers across these regions are coming up with freebies and tantalising offers to attract customers. They believe this may be a good time to boost flagging sales – though you never can be sure.
Despite beginning of the auspicious period, hard-nosed developers continue to remain sceptical on the revival of demand in the realty sector. Said Ram Raheja, director and head-architecture, S Raheja Realty: ``This year Gudi Padwa is falling on March 31 which will mark the auspicious start of a New Year and help buyers plan their finances as well. It is usually observed that many people prefer booking their new homes on Gudi Padwa, as people in Maharashtra consider it an extremely auspicious day to make new purchases. It is a psychological improvement in sentiment that is seen during this period.’’ He should know.
Raheja continues: “Currently, sales are steady for our company. However, as an industry we have definitely seen better days. Many developers are offering deals and discounts to encourage buyers and help uplift the mood. At S Raheja, our marketing strategy does not include offering discounts, as our pricing is reasonable. However, to keep up with the festival mood, we have reduced our booking amount for those who want to book a house on Gudi Padwa.”
But the key question is this: will even a potentially winning combination of Guda Padwa and the new fiscal change turn things around for the realty sector, which has been in a bit of a loop?
Clearly, while sentiment is important, it cannot become a substitute for economic well being. This is mainly because there are multiple reasons apart from these that play an important role in encouraging sales of homes; factors like availability of home loans, desirable house and flats which suit a buyer's budget, and homes at preferred locations. A buyer is hardly likely to be jumping with joy at the prospects of travelling 30 to 40 km to work!
However, experts believe there will be a slight shift in trend, due to a combination of festival gaiety and — you have got it right — salary hikes. However, the prevailing sentiment will continue to remain low. This is also due to the wait and watch mode adopted by the market owing to the upcoming elections, Raheja added. If things go right after the elections, sky could be limit.
According to Sunil Mantri, chairman, Mantri Realty, at the moment the market is driven by end-users and investors are mostly signing away from the realty sector given the prolonged slowdown in both commercial and residential segments. Investors are looking at other opportunities like the stock market and investing in gold.
Adding a touch of optimism, however, Mantri said real estate prices have corrected a bit and there are multiple offers and freebies available at the moment, which would benefit both end-users as well as investors. There is an added incentive to buy: discounts may not continue for long as post-elections, property prices may once again start inching up.
According to a 99acres.com quarterly report, focusing on buying and rental price trends in residential real estate across seven major cities of India, the residential property prices per sq ft have remained unchanged in Q4, 2013, as compared to Q3, 2013. Annual comparison (Q4-13 with Q4-12) shows a double-digit growth of 16 per cent year-on-year.
Points out Vineet Singh, business head, 99acres.com, ”Mumbai’s status quo as the financial capital city of India has ensured that capital prices in the region have stayed above normal. The past few months have seen a steady decline in transactions both in the primary and secondary market due to rising prices.”
Also, coupled with protracted construction time, there is a delay in the delivery of projects, which has stymied price stability in the region. The city is expected to see a price correction over a period of a year to ensure the equilibrium of demand and supply in real estate, said Singh.
“If we compare the price trends to other metros, the Delhi-NCR region has seen a decline of two per cent while Bangalore has seen no change in capital prices. In terms of rentals, the Delhi-NCR region has seen a downward trend with a decline of seven per cent while Bangalore has witnessed a 4 per cent increase in rents in Q4, 2013 as compared to Q4, 2012,” Singh added.
Property prices in Mumbai have historically been high; however capital prices in the Mumbai region have stabilised in the past year. Key localities in Mumbai like Worli, Breach Candy and Mahim (West) have seen an increase of only 2 per cent in Q4, 2013 as compared to Q3, 2013.
Explains Sachin Sandhir, managing director, RICS South Asia: “Currently the Indian real estate market, especially residential real estate, has witnessed challenges in the form of poor sales and high inventory of unsold units. With the current glut in the market, it is expected that sales will remain subdued for next two quarters and prices will move up only marginally in coming months.’’
While prices will see some firmness during the festive season, it could also coincide with a spurt in activity. The Indian penchant for festival buying is legendary!
While occasions such as Gudi Padwa and Pôhela Boishakh bring such tempting offers in the market, buyers are well advised to exercise caution and discretion by not falling for any dummy scheme. Experts warn that prior to any decisions being made, it is essential to evaluate ones options and assess the feasibility and viability of the project as a whole rather than base one's decision only on the level of discounts being extended during the festive season.
They say more often than not, such discounts have strings attached and not all incentives are bunched together. Also, most of these freebies typically tend to be time constrained and offered only on select projects.
Pankaj Kapoor, chief executive officer at Liases Foras, said: “At the moment many offers are available and customers can actually get a good deal if they cautiously evaluate the projects and invest smartly.” Better to be safe than sorry.