REALTY COS TO CUT PRICES, OFFER GIFTS TO BOOST SALES
The slump in home sales coupled with dropping rentals and tight liquidity conditions have forced builders in key cities such as Delhi, Mumbai and Bangalore to cut prices, offer gifts such as cars and boost marketing spends to tide over the difficult time.
Last week, at the Grand Hyatt Hotel in Mumbai, leading developers of the city were closeted for an hour-long meeting. The aim was to discuss ways to counter the decline in home sales that has persisted for almost a year now. What emerged from the closed door meeting is a reflection of the limited options that an Indian developer today has. The builders unanimously agreed to allow the customer to have a greater say in price negotiations, or in other words, they decided to cut home rates. The developers agreed to give a 10-12% reduction to all consumers, albeit couched under schemes such as bearing 2-3% of the interest cost, flexible rates for parking and floor rise pricing.
"Don't be rigid on rates, allow the customer to have his say," was how one participant who is involved in large housing projects in suburban Mumbai, described the meeting's conclusion.
The move assumes significance as a correction in Mumbai home prices would create a ripple effect in rest of the country. Although residential prices across
"This quarter was crucial for us," said the developer who was present at the meeting. "Demand is still robust as far as residential markets are concerned. What we want is to convert the demand into actual deals. If pricing is hampering the sales, we are willing to compromise on that," he added.
On a year-on-year basis, Mumbai home prices have risen 15% in the past six months. So far, developers were not ready to accept that demand at high prices would weaken. Developers could afford to do that as they are sitting on a large profit pile accumulated over the last two years of
"But these same developers have realised that demand is unlikely to come at the prices seen two years back," said an analyst with Kotak Securities. "We believe demand can only come back if prices correct."
Some of the developers who are learnt to have attended the meeting included Akruti City, Nirmal Lifestyles, Kanakia Builders, Evershine Builders, the Rahejas and RNA.
Several developers in the national capital region are now offering deeper cash discounts and have pitched up their marketing efforts to attract clients. Developers are banking on more "genuinely priced" product, a good cash discount and higher advertising to lure buyers. "We didn't offer any discount during festive season last year," said Raheja Developers chairman Navin Raheja. "But this time everyone is giving it as market conditions have changed."
Raheja Developers is offering a discount of Rs 200/sqft or around 6-7% in its soon-to-be-launched high-end project in sector 109 in Gurgaon. With an aim to lure government employees —the beneficiaries of the Sixth Pay Commission — the company is offering an additional discount of Rs 100/sqft.
Developers said they have asked industry chieftains and associations to restore investors and buyers' confidence in the sector. Sales have dropped over 60% in the past quarter due to rising interest rates and additional pressure on household budgets.
Hoping for strong sales in the residential sector in the coming festive season, developers across
Mumbai-based Sunil Mantri Realty has waived stamp duty (5% of property value) for buyers at its
Citigroup-backed Golden Gate Properties has a car on offer for every customer who books a flat at its Golden Palms project on the Hennur-Banaswadi road, some 30 minutes away from
But industry observers say cutting prices alone may not bring in buyers as sales have touched an all-time low and steep interest rates have affected the confidence of home buyers.
Courtesy:- ET dtd:- 3rd Oct. 2008
Date: 04 October 2008, Saturday
Comments (0) | Add Comment