Should one pay attention to the Deals and Schemes offered by Indian developers? Are they a marketing gimmick or a fact? Read here
The Indian real estate industry has been going through a lean patch. The economic slowdown and high inflation have resulted in a drop in transactions of the residential real estate market. The fact that property prices and interest rates have remained high over the past 3-4 years is proving to be the biggest financial and motivational setback for the potential buyers. As a result, most end users are playing a wait and watch game. In the present real estate scenario, Indian developers are finding it challenging to get homebuyers and as a result the unsold inventory is increasing. The developers are also finding it tough to raise funds; therefore, most of them have their major focus on clearing up the inventory and selling off the projects that are already in existence. It is widely expected that the low demand of property is unlikely to pick up in the next 12 months as property prices and interest rates are likely to remain high. Due to culmination of these factors, the market is flooded with deals and schemes that the developers are offering in their drive to attain the objective of generating liquid cash.
There is a wide range of schemes and deals that the developers are offering; however, broadly they can be divided into two categories, Cash discounts and Freebies in kind. Let us elaborate further on the two categories:
Cash Discounts: As the name suggests, cash discount is a reduction in the purchasing price of a property. Following should be noted with respect to cash discounts
- The quantum of cash discounts depends on the financial health of the developer and the stage of completion of a particular project.
- In today’s market, the cash discounts offered range between 3 to 5% of the property value.
- They are generally offered by Cat B & C developers or by developers who find it difficult to raise money at affordable rates through any alternative source.
- Most developers do not opt for cash discounts with the fear of a panic reaction from the investor community.
- The cash discounts are generally routed through select agents in exchange for a minimum unit booking and these agents in turn pass on the discount to end customer. Most developers will even refuse to acknowledge that they are offering cash discounts.
Schemes and freebies in kind: This is more popular in the current market scenario and many developers provide various goods, in kind, to attract the homebuyers. They find this option convenient as the cost associated with these schemes do not end up altering the established per square feel (psf) rate of the project. The end users also get lured as they see greater benefits. Following should be noted with respect to schemes and freebies in kind
- The freebies in kind often range between 3 to 12% of the property value. It is higher for luxury and high end properties and lower for affordable homes.
- The popular schemes and freebies currently on offer are:
1. Pay 40% at the time of booking and balance on possession
2. Pay 20% at the time of booking and no EMI for next 12-18 months
3. Free car parking and club membership
4. Free furnishing (including air-conditioning)
5. Free car or travel voucher (make and kind depends on the value of property)
- Subvention schemes are also offered by developers in collaboration with the Housing Finance Companies (HFCs).
These discounts and freebies are being offered all across the country. The intensity of discounts is the highest in the regions where investor community is the major driver of real estate activity like Delhi NCR, Mumbai, Kolkata and Pune. The cities in south like Chennai, Bangalore and Hyderabad are relatively more end user driven and thereby are less intense on freebies side.
What is the best way to deal with these schemes? Now, the major doubt that arises in the minds of homebuyers is regarding the genuineness of these deals and schemes. The homebuyers often wonder whether the schemes are just another marketing gimmick or the deals have something in store for them. To help resolve the suspicion, www.makaan.com here provides you a few tips.
As per our recommendation, you should initially go about your property search as if these discounts and freebies do not exist in the market. Sound and fundamental way of judging the true worth of the property based on your requirement should be followed before you evaluate the discounts and freebies aspect. This is going to be your biggest purchase and fundamentals should prevail over anything else. You should evaluate the available options based on following three fundamentals of property search
Past track record of developer: Before short listing a property, a homebuyer should make sure to check the credentials and past track record of the developer. This is extremely important during the current time. One should check whether the developer meets the deadline for delivering the projects as the schemes would only be beneficial if there is timely possession of the property. One can also check on the status of the approvals for confirming the delivery. Searching on web will give enough feedback on the credential of developer.
Location and connectivity: Location and connectivity are key components of any property search so be sure to double check the project based on these parameters.
Project specification: The project that you shortlist should meet your specification in terms of area, amenities, bedrooms and most importantly budget.
Once you have short listed 4-5 projects, kindly rank them in order of your liking and preference. You should enter into a negotiation or deal discussion only with these short listed developers. In a nutshell, schemes and freebies are good but they come at the last leg of the property search. Do not make a mistake to start your property search based of these deals and schemes. Practice this winning mantra and enjoy your property investment.