Sliding property sales spur discounts, offers of sops

MUMBAI: Rakesh Kapoor, a property broker, was surprised when he took his non-resident Indian client to buy a flat in Thane.

Developers such as Hiranandani and Kalpataru offered a discount of more than 5% on the quoted price. And there was no change in the property price tag for the past three months.  

“Six months ago they refused to negotiate. Clients were bluntly told ‘take it or leave’,” Kapoor said. 

Things have changed. As sales dipped over the past six months, developers stopped increasing their prices further. In fact, they are offering discounts between 8% and 10% to convert inquiries into sales. 

“Current year’s sales in the summer and monsoon have been the worst compared to past three years’ performance,” said the spokesperson of the Neelkanth Group, a Ghatkopar-based developer. 

DNA’s survey of real estate brokers and property consultants shows that developers have not increased property prices at least for the past four months. 

“There were expectations that a slowdown is around the corner,” said Pranay Vakil, chairman of Knight Frank, an international property consultant.

“Expected decrease in prices has not happened thanks to stock market’s performance and other factors. Sales has been too slow.”

What Went Wrong? 

Since late 2005 and early 2007, home loan rates have increased by 4%. At this rate, the outgo increases by a minimum of Rs350 per lakh. “Home buyers usually ignore the first two interest-rate increases. When the trend continues, buyers defer their decision,” said Tarun Bhatia, head of financial sector rating at Crisil. “Lenders too have slowed down as they want to prevent bad loans.”

Also, it is an industry trend that sales slow down during the monsoon. This is mainly because buyers avoid visiting sites. “Out of the annual sales, 25% to 30% happen between April and September. The remaining from October to March,” said Vimal Shah, managing director, Akruti Nirman. 

Typically, in rainy season, developers avoid putting up new projects on sale. Instead, they sell the remaining stock from existing projects. “But this season we have seen that developers are finding it difficult to sell this stock too,” said Raja Kaushal, CEO, Betterhomes. The company offers real estate consultancy and broking services. 

He suggests that buyers are waiting for a correction in either home loans or property prices. “With banks such as ICICI and HDFC making optimistic statements on property price correction, lot of buyers have postponed their purchase,” Kaushal said. 

“Out of every 12 customers who committed to buy properties, at least eight are backing out at the last moment,” said a reputable developer who did not wish to be named.  “This is happening for two reasons. Either they find the property has suddenly become expensive or they realise that high home loan rates can affect them.”

Are all areas affected? 

“The sales have been worst affected in the western suburbs. Central areas have seen a decent response comparatively,” said Neelkanth group spokesperson. 

Since the appreciation in prices in the central suburbs was not as high as that in the west, the latter was worse affected, according to brokers. Some residential projects in Jogeshwari, Goregaon, and Thane have increased their property prices marginally in recent months. 

What next? 

But the sales are expected to improve from October onwards when the festival season begins. “New projects will come up in the market after the monsoon,” Shah said. 

“Developers avoid launching new projects during the rains as it causes construction-related problems due to flooding.” There can be a marginal increase in prices during this season, brokers say. 

“A lot will also depend on stock market performance apart from other fundamentals such as interest rates,” Vakil said. 

Meanwhile in Thane, Mulund

Developers in Thane and Mulund have started facing the heat, as sales drop. Many developers have started schemes to woo buyers; others are willing to negotiate. 

Swastik Alps, a project located off Ghodbunder Road, is offering imported fittings for the house. These include modular kitchen and modular bathrooms with a glass sink area. The project is priced at Rs2990 per sq ft with a floor rise of Rs20, when developers such as Kalpataru are selling at Rs4,800 per sq ft. 

In yet another project, Dhaval hills located close to Gawand Baug area, a developer is offering a flat discount of Rs2 lakh or a Maruti 800 car. The project is priced at about Rs3,500 per sq ft. 

Many are offering attractive schemes, 24-hour power back-up and inverters. Other reputed developers have either lowered the priced of new projects in Thane and Mulund or are offering discounts when the buyers show money.