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Last year saw the real estate sector face its worst crisis in recent times. Delhi-NCR alone saw a steep decline of 28 per cent in the launch of new projects from the previous year as a consequence of subdued demand and high prices. With the turn of the year and sitting on unsold inventory of more than 620,000 housing units across the country, developers are taking the easiest way out to attract new customers - by offering freebies.
Supertech, at its Cape Town Project in Sector 74 in Noida, is offering buyers of its top floors a free studio apartment in Golf Village on the Yamuna Expressway. In Bengaluru, Nitesh Estates is offering heavy cash discounts on the purchase of some of its apartments. Recently, the Lodha Group organised a flash sale at its Lodha Grandezza project in Thane, offering flats at roughly Rs 8,000 per sq ft, down by more than Rs 3,000 per sq ft. In Kolkata, Siddha Group and Eden Realty are offering free cars on the purchase of each flat. With such schemes on offer, is this the ideal time to buy a house?
According to Nishant Singhal, director (strategy and alliances) at Investors Clinic, a real estate consulting company, there could not be a better time. With developers slowly cutting prices and plenty of subvention schemes on offer, buying a house is a smart option. "With developers desperate to sell, buyers can bargain and get the right price. Prices haven't been so low in the last 15-20 years," he says. Singhal also feels that the freebie schemes have already struck a chord with buyers and are doing well.
R K Arora, chairman, Supertech, says that the "buy one get one free" offer has been received warmly, increasing cash flow and giving a much needed boost to his company's sales volume. "After the formation of the new government, the buyer sentiment has turned positive and the number of queries for such projects has gone up," says Arora.
However, K K Setia of Intown Realtors, a property consultancy based in Noida, disagrees. "The response to these schemes has been lukewarm. Properties are already overpriced and the buyers are smart enough to know that," says Setia. "If you want to buy a house and immediately move in, then it makes sense. But buying a property merely for investment is not a wise choice because the market is not expected to pick up anytime soon." Demand is slow and prices will only shoot up once developers have cleared large unsold inventory. Also, the rental yield on residential property is low and one would have to hold on to a property for a longer period to garner returns.
Heading into 2015, developers were staring at unsold inventory of 39 months across all major metros. Mumbai and Delhi-NCR topped that list with unsold inventory of 55 and 51 months, respectively. Anuj Puri, chairman and country head, Jones Lang LaSalle India, feels that sales can only improve if developers become more earnest about right-sizing and right-pricing their offerings. "Only selective corrections in some of the over-priced cities will help bring about faster sales for stagnated supply," says Puri. As for freebies, Puri is quick to warn that these offers will work only as long as they translate into clear financial savings for buyers, and as long as the property in question is priced right. Freebies will not work to help move overpriced units.
However, prices across the country are not likely to fall any further. While there is renewed optimism due to a stable government in place and its "business-friendly" approach, increase in service tax announced in the Budget and high input costs will hamper price correction. These increased costs will be passed on to the buyer. Moreover, margins continue to remain low for most developers.
While there is a slight upswing in the sale of housing units, mainly due to lower rates and attractive offers, the two most premium real estate markets in the country - Gurgaon and Mumbai - have seen a marginal increase in prices this year. According to Liases Foras, a private ratings and research agency, Mumbai saw a rise of 21 per cent in unsold inventory last year. Yet, prices in the Mumbai Metropolitan Region, curiously, went up 10 per cent. "Mumbai, compared to all other metros, has done better in terms of sales in the last couple of years. But developers must realise that offering freebies is not enough. The prices must be realistic," says Pankaj Kapoor, managing director, Liases Foras.
According to Kapoor, Borivali and Kandivali are the only two areas in Mumbai offering reasonable prices. "At Rs 3,000-4,000 per sq ft, these two destinations are ideal if you're looking at a small house. It is a good investment," he says. However, he is quick to point out that reducing prices is the only way forward for developers. "There is no better way of stimulating demand," he says.
In Bengaluru, the hottest property destinations are Whitefield and Horamavu. A bustling information technology hub, the demand for mid-size houses in the garden city has seen a steady increase. Experts feel that there are buyers in the city who have been studying the market for suitable options for a while and know what they want, but are waiting for the right mix of factors to help them make the final decision.
The Reserve Bank of India's decision to cut the repo rate - the rate at which it lends to commercial banks - will lead to lower equated monthly instalments on home loans, making houses more affordable. More important, developers are most likely to withdraw discounts and schemes once sales start improving. So the time to buy seems just right. "Prices will more or less remain stagnant for the next two years. If you can find a house that comes with a good location, then you should not be thinking twice before buying," says Kapoor. However, buyers must guard against project delays and not invest in properties that do not have requisite clearances.
WHAT'S ON OFFER?
> Delhi-NCR
Supertech, at its Capetown project in Sector 74 in Noida (below), is offering buyers of its top floors a free studio apartment in Golf Village on the Yamuna Expressway. Luxury apartments at Ambience Group's Caitriona project in Gurgaon are available with a cashback of Rs 16 lakh
> Bengaluru
A free modular kitchen is on offer with the purchase of each apartment at Salarpuria Sattva Group's Cadenza and Greenage projects. Nitesh Estates is offering cash discounts on some of its projects
> Mumbai
The Lodha Group recently organised a flash sale at its Lodha Grandezza project in Thane, offering flats at Rs 8,000 per sq ft, down by more than Rs 3,000 per sq ft
> Kolkata
Siddha Group and Eden Realty are offering free cars on the purchase of each flat
