INCENTIVES ARE PLENTIFUL THIS FESTIVE SEASON TO WOO BUYERS TO PURCHASE THEIR DREAM HOME.
TEXT: RUSTAM SINGH
The Festive Season is upon us. Starting from Onam and Ganesh Chaturthi in September to Dussehra, Diwali, Durga Pooja and ending on a high note in December with Christmas and New Year, this is an auspicious time for everyone. Homebuyers especially, look at this period as a good time because of the line-up of 'exciting offers’ from developers, banks and household goods companies alike.
HOMEBUYERS WANT AFFORDABILITY WITH MODERNITY
Homebuyers want a little extra to sweeten a deal this season, given the market’s lukewarm performance. From amenities that reflect their modern lifestyles including modular kitchens, luxury bathroom fittings, buyers are looking for a little extra. Buyers are younger than before, and are willing to take 80-85% loan but won’t compromise of amenities. Good location with access to lifestyle options like clubs, gym, parking and markets are important deal makers. This is apart from the usual discounts, fee waivers and rent guarantees by developers for festive sale bonuses.
As per ANAROCK’s Consumer Sentiment Survey H1 2019, more than 60% of consumers questioned stated they are serious about buying homes in 2019. Market trends have reflected buying increases exponentially annually cashing in on the season, each of India's top real estate markets has its own trends for developers seeking to milk the traditionfuelled homebuyer sentiment.
AMENITIES, FREEBIES, DISCOUNTS & MORE
Here’s a rundown of top cities in India and what developers are offering as attractions to homebuyers for the festive season:
NCR: With more than 1.18 housing units collectively worth Rs 82,200 crore waiting, the region witnessed judicial intervention on behalf of homebuyers recently and has several strong developers with viable projects. Developers are focusing on incentives like free car parking, clubhouse membership and miscellaneous gifts like modular kitchens.
MMR: With an unsold inventory of about 2.24 lakh units worth Rs 2.54 lakh crore, waiving off of GST and stamp duty and registration charges is hot with developers. This translates to a discount of between 5-12 per cent of the overall property!
Pune: A cost sensitive market with relatively lower property prices, similar waivers of GST and stamp duty and registration fees are popular festive season incentives in Pune.
Bengaluru: Developers offer either up-front cash discounts or flexible payment options. Very few projects offer direct cash discounts of up to Rs. 5 lakhs during the festive season. Entirely funded by developers flexipayment options like an up-front payment of 10 per cent with no further payments for the next 15-18 months can also be found in Bengaluru.
Kolkata: Kolkata’s developers too are offering freebies such as gold coins, waiving off of added costs such as floor rise charges, and free fittings such as air conditioners, modular kitchen etc.
Hyderabad: The city is trending with direct cash discounts, flexi-payment options and rental assurance once the project is completed.
Chennai: Upfront discounts or offering freebies like gold coins, free furnishing, etc are the season’s incentives.
Super high input costs: Delays in getting requisite approvals, increasing cost of land acquisition and high cost of raw materials are major factors that prevent developers from discounting property prices further. Essential construction materials like cement and steel still fall under the highest GST slab of 28%, making affordable price moderation extremely challenging. There is also an increase in customs duty on various raw materials such as PVC, vinyl floor etc. in the recent Union Budget which adds even more pressure.
RBI restrictions: Reserve Bank of India’s 110 basis point cut in the repo rate this year but transmission of policy rate cut down to the retail level has not taken place. The lack of corresponding reduction in real interest rates is claimed by the housing sector for keeping the demand subdued ahead of the festive season when a large number of Indians prefer to buy a new property or assets.
Low buying sentiments: According to RBI’s data, rise in property costs have not matched with rise in incomes. Thus while the average household has increase their loan, it has left a poor priority for the average buyer to invest in property at the moment. Repeated negative news and spreading negative sentiments has cautioned several buyers to invest in gold of bonds and stocks instead of property at the moment, a trend which must change for a stronger economy and profits for all.
The actual reasons for lower sales volume is not just the price points, lower demand or economic policies; it is the lack of confidence by the buyer in the overall sector. This has been formed after years of prolonged project deliveries, quality of materials and built issues, complete lack of regulators, etc. These issues trickled down to the consumer who has made decision making slow and sales stagnant. With RERA getting implemented in almost all the cities, buyer sentiments are bound to improve. RERA is expected to help solve these issues viz to its stringent clauses and penalties.
EXPECTATIONS THIS FESTIVE SEASON
There have been recent announcements of increased credit support for home purchases, vehicles and consumption and added liquidity of Rs 20,000 crore to housing finance companies for lending to real estate developers illustrate this approach. The Modi government appears to prefer to fix the country's economic immunity and strength long term than infusing temporary energy bursts via fiscal shortcuts providing temporary relief. Knowing this, it is perhaps unrealistic to expect a policy windfall or sudden change this festive season.
What the real estate sector can reasonably expect in the immediate future are:
• A reasonable taxation approach to under-construction and ready-to-move properties;
• The creation of stress asset funds to complete stalled projects which will see visible change in the industry almost as soon as installed;
• Stricter and compulsory enforcement of RERA across all applicable states and Union Territories,
• Stronger measures to attract long-term investors to push sales in the residential market;
• Immediate easing of lending norms to the real estate sector and thereby get stalled projects moving again to meet buyers expectations on time, thus restoring faith in the sector again.
Here comes the unavoidable importance of due diligence and research. Buyers will opt for RERAregistered developers with a good proven track record of delivery and quality. They will also expect wiggle room in the best suitable financial payment plan to buy their dream home.
Ultimately, developers must also anticipate a slight rise during the festive season, but focus on completing projects on time and delivering competitive world class amenities, services as well as futuristic designs and materials to retain customers in the long run. Buyers should in the end be aware these goodies don’t add to their cost of property.
HARD TO RESIST OFFERS
Buy back and assured returns scheme: Under these schemes, buyers are assured of 10-15% assured returns in exchange of paying 35-40% of the property cost in about 3 years. Dealers and developers entice this as a fail-safe for those looking for safe investment.
Furnishing flats: Developers are offering to furnish flats with exciting deals such as cupboards, air conditioners, modular kitchens and even furniture to form a ready-to-move in flat for homebuyers serious to start living post festive season immediately.
Free car parks/ club membership: Developers are prioritizing luxurious clubs which include gyms and spas with no membership costs exclusively for the festive season. Some even offer free car parking to make moving in easy.
Festive discount on down payment: Some developers are offering a limited period only discount of upwards of 10% discount on the initial down payment. This increases the buying capacity of most homebuyers.
Foreign trips and goodies: Some developers are going as far as offering iPhones, kitchen appliances and even a air tickets for a foreign vacation! Buyers must ensure the costs of these goodies are not sublimely added to their property costs.
