Indian realty not celebrating this festive season

October 10, 2008	(Be the first to rate this story!)  Loading ...
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The festive season is a great time for both the buyers and the developers. . However, this year is a testing time for the industry. In the tier II and III cities the situation seems to be challenging for most developers this year. Many developers are not officially reducing the per sq ft price as they may not be able afford it. But even those who can afford it may still not do it as it will send a wrong signal for his reputation and for the state of property market. The stigma attached to the property price reduction in the Indian market coupled with an on going slow-down may result into stagnancy. Considering that the sentiment may worsen further, choking the cash flow, he may opt for discounts to push sales in the current sluggish market. Most developers are now offering the reduced price under the disguise of incentives. Those shying away from accepting the correction are labeling it as ‘Festival-discount’. Those who are not yet open to this idea are giving away the discounts to the customers on the negotiating table.

Despite being an inevitable part of most property purchased, lending statistics have declined as banks are also hit by the slow down. High rate of interest has added to low turn out at the home loan counters. Now, a few banks have also joined the incentive band wagon. Many nationalized banks are charging 1 per cent less interest during the period of festivities and for selected projects only. Many are waiving off the 1 per cent processing fees as well. Some banks such as State Bank of India (SBI) have tied up with some developers to offer ‘Interest Subvention’. This means the buyer will be paying 2 to 2.5 per cent less interest on the loan taken during the first two or three years during which the construction is going on. SBI has already announced interest rate of 11 per cent and further declared 0.25 per cent reduction for selected projects for stipulated period of festivals.

An industry expert says, “Discounts are usually offered in projects which are not selling. But this is not an indicator of a negative response for the project. Developers usually bring down rates in their overpriced projects to an affordable level.” In the Delhi-NCR region, many developers have started to consider offering such discounts. However, in Mumbai and around, many developers have declared various incentives. Sunil Mantri Realty Ltd is offering ‘No Stamp Duty’ for its project Mantri Park at Goregaon (east), Ravi Group is offering assured tax free benefits worth up to Rs 15 lakh if one books a flat in any of its Mira Road projects. Lok Group is planning a rebate for their up coming project while the Runwal group is planning to offer customization of the flat as per the buyer’s taste.

However, most discounts have strings attached. Firstly, all incentives are not offered together. Secondly, many of them have a time limit. Another condition is that the offers are not for all the projects but for a few selected ones. It is usually for those projects which are either slow moving or at the very primary level when developer would need funds to carry on further. Many a time the direct reduction in price is applicable only for those who are going for a full down payment. Sometimes there are other limitations and discretionary conditions as well.

News Published Under:   Real Estate Developers |

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