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Have the elections played spoilsport?

Developers could be offering just a few freebies because potential buyers defer making real estate investments due to the impending polls

realestate Updated: Apr 07, 2014 19:14 IST

If you were scouting for an apartment during the Navratra last year, you were probably promised a gold coin, an all-expenses paid trip to Singapore or a no-EMI- till-possession option. This year, with the Lok Sabha elections just around the corner and most developers going through a liquidity stress, those planning to invest in residential property should not expect too many freebies.

Now the question is, have the offers been reduced to a trickle because of the Lok Sabha elections? While it’s true that many prospective homebuyers are waiting for the elections to get over before they take the plunge, experts point out that end-users will not be directly impacted by any such factor and will make a home purchase as and when they find the right product in the market. Only investors will wait and watch.

What, however, is being offered is in the form of direct financial benefits such as bulk payment on possession, payback schemes, free parking, waived stamp duty and registration charges.

Most developers are offering customised payment plans to buyers wherein the purchaser gets the benefit of time and value. He pays 20% upfront and the remaining amount at the time of possession. Another trend that is being seen is that many builders are repositioning parts of existing projects, launching a new tower with a new name in order to create interest and boost sales.

“While the high-net-worth individuals are not putting their money in real estate, it is the end-user who is returning to the market and looking for bargains. He is also aware of the fact that once a stable government returns, prices are only going to shoot up. As a matter of fact, the resale value for projects in the range of `4500 sq ft to `5500 sq ft have gone up by 3% to 5%,” claims Anckur Srivasttava of GenReal Advisers.

There has been a recovery in the resale valuation because end -users have returned to the market. Elections impact the sentiment of the market but do not affect the end-user much. So, if a buyer has located a property that’s populated, infrastructure has already developed, the price is right and all the fundamentals are in place, election or no election, he is bound to purchase it, he adds.

The elections may impact markets where investors are in majority and the speculative element is largely predominant. Affordable markets will always find buyers.

What’s on offer?

The slowdown in the real estate sector has allowed developers and brokers to devise new marketing strategies focused on factors which influence buyers. To cite an example, the subvention scheme (or no-EMI-till possession scheme, EMI-holiday-till-possession scheme) to address the liquidity concerns of a buyer has proved to be a highly effective marketing strategy.

However, such schemes though banned by the Reserve Bank of India (RBI), have initiated a drive for innovative selling strategies. These include 20% amount to be paid on booking and the rest on offer of possession.

In the light of the slowdown and even the elections in the offing, developers are faced with the difficulty of clearing the existing unsold inventory of properties.To clear the unsold inventory, developers are offering freebies ie gifts, incentives or special discounts and even financial benefits such as free registration.

It is estimated that these freebies, including the existing discounts, are in the range of 5% to 10% of a property price.