News | Sept 26, 2022
As happens every year, builders hope to cash in on sales during the festival season, a bigger ask this time due to higher costs. But they are relying on a clutch of sweeteners to swing the deal.
In a bid to offset the increase in acquisition costs on account of the recent hikes in interest rates by the Reserve Bank of India (RBI) and spiralling commodity prices, developers are doling out a wide range of freebies such as free car parking slots, electric bikes and other schemes to lower the homebuyer’s cost burden.
However, there are some who believe that despite new launches in some markets, especially in Mumbai, demand may remain tepid because people are keen to take part in the festivities after two years of restrictions, leading to lower footfall. Moreover, negotiation power of buyers has decreased because developers have better liquidity this time around compared to last year.
This season, as is the case every year, some builders have announced interest subsidy for a certain period and discounts in the form of cashbacks, apart from assured gifts of gold or consumer durable products. Others are offering stamp duty waivers (where the developer takes on the burden), booking amounts as low as Rs 21,000, free car parking slots and even a free Ola electric two-wheeler with each booking, or a discount of up to Rs 2 lakh.
Housing sales in the upcoming festival quarter (October-December period) are expected to remain more or less the same last year when, as per ANAROCK Research, as many as 91,000 units were sold. “This year, too, we anticipate that it would more or less remain the same despite the increase in overall cost of property acquisition amid interest rate hike, developer cost, etc. This reflects a positive trend,” said Santhosh Kumar, vice chairman, ANAROCK Group, a Mumbai-based independent property consultancy.
Despite a price hike by developers and the RBI raising its policy rate by 140 basis points making home loans costlier, housing sales continue to remain strong across the top cities as genuine buyers are coming forward. Homeownership became a compelling priority during the pandemic, and also, despite three successive hikes by the RBI, interest rates are lower than during the global financial crisis of 2008, when they went as high as 12 percent and above, he says.
Several new projects are now being launched by listed and large developers, which is also attracting end users as well as investors. Home-buying today is skewed towards branded players who in turn are reporting good sales.
Also, there is ample ready-to-move-in inventory for the discerning buyer and this may further push sales during the auspicious festive period (given that ready homes top demand). As per ANAROCK Research, there are more than 1.21 lakh ready units available across the top seven cities. But the fact is that the market is still a buyer’s market, leading to the raft of giveaways offered by developers.
There may also be demand from buyers wanting to upgrade their homes, says Anshuman Magazine, chairman and CEO, India, South East Asia, Middle East and Africa, CBRE, a leading real estate services provider.
“One must remember that the festival season offers become relevant only if consumers feel they are getting a good deal. As in the case of any other sector, festive offers are utilised to clear unsold inventory. This season, some home purchases would be on account of people wanting to upgrade to bigger homes with better facilities. Gains made from the stock market may also be deployed in the real estate market,” he added.
Housing sales are generally higher during October-December compared with the previous two quarters because of the festival season that is considered an auspicious time to buy a home and which lays the foundation for the January-March quarter which is usually the best for residential real estate sales. This year again, sales during October-December are expected to remain buoyant despite higher costs.
“We believe that despite the hikes, home loan rates are still in a comfortable zone and developers are also expected to announce various festive offers to attract customers,” said Dhruv Agarwala, group CEO of online real estate platforms Housing.com, Makaan.com and Proptiger.com.
Striking a contrary note, an expert with a property consultancy firm in Mumbai said, “I think there were more festive offers in 2021 compared to this year, at least in the Mumbai Metropolitan Region. The reason being that there was not much demand last year and developers were desperate to sell and, hence, were doling out more offers. This year the offers are less because developers are flush with liquidity.”
“This Ganesh festival, footfalls went down as people were busy celebrating after two years of restrictions. Prices have remained the same but the negotiation power of buyers has decreased because developers are better placed this time around compared to last year,” the person said.
However, Raajesh Prajapati, founder-president, Maharashtra Chamber of Housing Industry- Confederation of Real Estate Developers’ Associations of India (MCHI-CREDAI), Raigad, said, “The offers were there last year and they are there this year too. It depends from project to project and there is nothing like more or less offers. But one thing that has increased this year is demand, though the pricing has more or less remained the same.”
He added, “This year we expect the property exhibitions to cover up and make up for the festivals. Due to increased face-to-face activity this year, real estate exhibitions will make up when it comes to new sales.”
Dhiren Doshi, a property consultant in Mumbai, said, “There are offers that range from free stamp duty to discounts on purchase of 1BHK, 2BHK or 3 BHK (units). Now, many are saying last year there were more offers, but last year there were not many customers so having offers is obvious. This year there is both demand and offers.”
In Bengaluru, Balaji Badrinath, managing partner of the local office of America real estate consultants Coldwell Banker, said, “Bank interest levels are at the lowest now compared to pre-Covid levels. Also, salary increments did not stop.”
Pradeep Joe, chairman of the Confederation of Real Estate Associates, Bengaluru, said, “There will be a lot of prospective buyers owing to freebies given by the developer. Additionally, the market is looking great now which will definitely boost sales. Bengaluru recently saw heavy flooding but it is unlikely to dent the demand.”
Joe added that high demand for affordable as well as luxury housing in Bengaluru will continue till Christmas.
Demand for luxury housing expected to remain robust
Festivals like Dussehra and Diwali are considered auspicious times to make big-ticket purchases, including property, with a surge in real estate deals every year.
“As most economists predict, a strong GDP growth for India and numbers indicate a strong rebound in housing sales. We expect both end users and investors to consider investment in residential property this season. If done correctly, real estate can be an excellent vehicle for wealth accumulation and an equally strong asset to balance the stock market volatility and hedge against inflation,” said Ashwin Chadha, president, India, Sotheby’s International Realty.
With home loan interest rates in single digit and the number of UHNIs (ultra-high net-worth individuals) increasing every year, demand for luxury homes is likely to be quite strong, starting Navratri to the end of March 2023. “We hope to close 30 percent more transactions this year compared to last year,” he added.