The lull in the real estate sector has continued well into the first half of the year and unsold inventory in Mumbai has given rise to innovative offers for prospective homebuyers.
Sale of residential spaces has remained almost stagnant in the first half of 2018, according to the latest report by Knight Frank on the Indian Real Estate market. Compared to last year, there has been a mere 1 per cent increase in sale of residential flats. At present, Mumbai has around 1,19,526 unsold flats and records a 21 per cent vacancy in flats, according to the report. This is despite a dip in prices. The prices of flats, according to Knight Frank, has dropped by 9 per cent in Mumbai and yet transactions have dropped by 7 per cent.
Amid a slowdown despite drop in prices and with festivals around the corner, builders are making offers such as floor rise waiver, a 50 percent discount on Goods and Services Tax (GST) and allowing buyers to pay a small part of the cost upfront and pay the rest after possession.
“Offers are a part of the sales and buyers are showing their own due diligence and doing their recce before buying flats. These offers sweeten the deal for customers and help in enticing customers who are already in the buying cycle. It helps in reinforcing your project in the buyers consideration set,” Ashok Mohanani, Chairman EKTA World and Vice President National Real Estate Development Council West. At Ekta Tripolis, an upcoming project at Goregaon West, the builder is offering prospective homebuyers to pay 5 per cent of the cost upfront and the remaining after possession.
“Developers would sometimes like to offload their stocks for good cash flow management to at least run their existing business because the private finance cost is very high. Likewise, the rolling fund load is too much due to which developers do come up with these lucrative offers,” said Manju Yagnik, vice chairperson of Nahar Group.
Incidentally, the Knight Frank report found that apartment sizes have shrunk by 12 per cent and more projects were coming up under the ticket size of Rs 1 crore, hinting at a switch to affordable houses.
“Market is price sensitive and wherever possible, developers are modifying luxury products to affordable ones. Majority of the sales in current market situation is driven by affordable housing segment. Demand for both one and two BHK is up but it is mostly witnessed in far suburbs as they are extremely price sensitive. One BHK apartments are gaining traction among first time home buyers who want to upgrade their lifestyle,” said Yagnik.
Aditya Kedia, Managing Director, Transcon Developers, however, said that offering incentives cannot be the only way to push sales. “The product should speak for itself and should garner the trust of the buyer,” he said.
Over the past one year, the already damp real estate market slowed down further under the impact of new policies such as Real Estate Regulatory Act (RERA) and GST. “Builders are having trouble mobilising finances. The new policies have slowed things down but the industry is recovering,” said Niranjan Hiranandani, president NAREDCO and chairperson Hiranandani Communities.
Builders have said that while RERA slowed the market initially, it has built confidence among homebuyers. GST, however, has increased rates for under construction projects.
“This is why the buyers are currently looking at ready products instead of paying higher GST for under construction products,” said Yagnik.