While developers expect sales to grow, buyers should take a hard-nosed look before making a decision.Festival season 2014 is different for the real estate sector as developers are betting on the renewed market sentiment coupled with tradition to see their sales counters abuzz with activity.
Last year, the season, which begins with Ganesh Chathurthi and lasts until Diwali saw less than a 13 per cent year-on-year increase in sales. This time though, the festivities are following in quick succession. To add to that is the general optimism generated by the Budget pronouncements.
“This year, the festival season is well timed in terms of policy decisions by the Central and state governments, thereby impacting sentiments positively. This may be a catalyst for some end-users to reconsider their purchase decisions. There is widespread optimism this time, marking a turning point,” says Sachin Deodhar, president, sales and marketing at Rustomjee, a leading developer in Mumbai.
“The festive season is considered a peak time by developers, since 25-35 per cent of their annual sales happen in this relatively short period,” says Ramesh Nair, COO – Business & National Director, JLL India. As always, developers have lined up various offers to sweeten the deal for buyers.
Offers galore
In the Mumbai region, the once popular 20: 80 payment scheme is making a comeback. Here, the buyer pays 20 per cent of the cost as down payment at the time of booking and the rest 80 per cent is paid at the time of possession. This time, however, there is a difference. After the RBI notification on such schemes, the balance 80 per cent is no more linked with bank loans and the payment as per the stage of construction is no more implemented. So, the buyer gets couple of years to arrange for the funds without EMIs in most of the cases as the advertisements say “No EMIs till possession”.
In other markets, developers have packaged offers very innovatively. One developer has gone a step further and announced the finance scheme of 8: 92. While, one cannot say if it is a competition or desperation, another developer has declared “A free Hyundai-i10 car with every booking” and also “a lucky draw to win a Mercedes Benz”. Gold vouchers are also being offered by some.
There are also a few deals that offer “cash discounts” and “special price”. Some developers have announced “no service tax and no VAT” or in another variant “no stamp duty and registration”. These are the offers that one should consider which aims at reduction in base price or overall cost of buying. “Offers given can range from the very attractive to the downright meaningless. Freebies such as household goods, electronic items, automobiles and foreign vacations are generally announced. The offers that make the most sense are those add real value from the home purchase perspective, and would include waiver of stamp duty and registration charges, cost-free covered parking and hard discounts on the base price,” adds Nair.
The fine print
The offers, however, have strings attached. First, although the cash discounts are in lakhs of rupees, there is always a limit, prefixed with “up to”. All the advertisements do not reveal the base price or per sq ft rate or the total cost of buying, which would include taxes and parking charges etc. The discounts are deal or project specific and not a blanket reduction. All the offers say “conditions apply”. This frees the developer from all the offer-related obligations as well. Moreover, the ads are for “specific” or “limited” period only — which encompasses the festival season. This also means that with slightest recovery of economy or more than the expected response, the developer may withdraw the offer without giving prior notice.
Turning point?
However, in Mumbai and Pune — the two key real estate markets — the season has not, until now, witnessed sales to the extent that developers expected if one goes by the trends during Ganesh Chaturthi. “Just like last two years, even at the end of the Ganapati festival, and after a series of full-page advertisements, there is no significant response. Even investors are shying away,” says Naresh Mehta, a property consultant.
“The developers are hopeful that the religious connect will work. They are eyeing the Navaratri festival to achieve the target.”
However, there are some who believe otherwise. “Serious inquiries and sales have already increased by 22 per cent in cities like Mumbai, Pune and Bangalore during this year’s festive season. The remaining part of the festive season will peak at around 28 per cent over sales charted in the same period last year. Also, the additional sales momentum will maintain at a steady 20-22 per cent even after the festive season is over,” says Arvind Jain, MD, Pride Group, a Pune-based developer.
To buttress his point, he adds that there are deeper fundamental factors at play and that the festival season is just a coincidence. “The increased inquiries and sales are actually the result of the return of financial confidence. The actual home purchases take place on the basis of available liquidity, investment appetite and confident financial projection. The festive season can only have a positive impact on real estate sales if financial confidence has returned to a sufficient degree as in a depressed economic scenario, neither freebies nor religious sentiment can make a difference,” adds Jain.
Whether sentiments are play, or not, the home buyer should make a hard-nosed calculation on the purchase decision factoring in his financial position and look for a price benefit in the festive season offers. “If the offer translates into savings on the bottomline, such as a hard discount, free parking space that they would otherwise have had to pay for or waived stamp duty and registration charges, they can definitely consider it as long as the property itself meets their real needs and measures up on key investment parameters. The attractiveness of any offer should not cause a buyer not to take a hard look at the actual value proposition of the property,” adds Nair.