Season of rebates

The next few months will provide a lot of opportunities for consumers to bargain as real estate firms try to clear their inventories that have built up in the past six to eight months.

Pranab Datta | Print Edition: October 2010

During the economic slowdown of 2008, the real estate market witnessed depressed sales volumes and an inventory build-up. This resulted in low prices and a slump in the sector. However, by the end of 2009, signs of growth, as reflected in the macro-economic indicators, sparked a revival in the sector. With the improving job market, many who had shelved plans to buy property started reconsidering their options.

However, in early 2010, developers went overboard and increased prices as soon as the economic indicators reflected a positive outlook. In fact, in markets such as Mumbai and Delhi, prices in certain areas crossed the 2008 peak. This led to most buyers staying away. While the demand for affordable housing still exists, the sale of high-end and luxury projects has slowed down, resulting in inventory build-up once again.

So, this festive season, which began with Janmashtmi and will last till Christmas, promises to be a good time for buyers and developers. In fact, property firms conduct 30 per cent of their business in the one-and-a-half month period between Navratri and Diwali. The next few months will provide a window of opportunity for developers to time their project launches in order to capitalise on the upbeat mood among consumers.

Additionally, real estate companies will try to clear their inventories of the past six to eight months.

In order to increase sales during this period, most developers offer special schemes, such as discounts, absorption of EMI and stamp duty, zero charge for floor rise, free parking space, modular kitchen, etc. In some cases, they even provide fully furnished flats so that the buyers can move in immediately after taking possession.

Even banks acknowledge the importance of this period and try to cash in on the surge in demand for home loans. Besides offering attractive loan rates, they allow lower margin requirements, zero processing fees, flexible repayment mechanisms and spot approvals.

Recently, Allahabad Bank announced a 1 per cent rebate on home loans during the festival season. Such offers provide consumers with an additional incentive to time their purchases during this period.

Since such lures will be limited to the next few months, the buyers who are planning to purchase property should look for bargains, assuming, of course, that the fundamental drivers for acquisition have been evaluated. Some of these schemes and offers are more beneficial than a simple discount on price.

However, before committing to a developer, you should make sure that you research aspects such as developer credibility, location, land title, completion date, etc, instead of concentrating solely on the scheme. The projects nearing completion could invite a higher price compared with the new launches because of the lower risk involved.

The coming months offer the perfect opportunity for buyers and developers to close profitable deals. Developers will push to convert demand into actual sales and, for buyers, there is an opportunity to drive a hard bargain.

The writer is VC & MD, Knight Frank India

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