Lockdown effect: Builders offer 8%-18% discounts to woo buyersUpdated: Jul 17, 2020, 01:06 IST
Builders across Mumbai Metropolitan Region (MMR) are resorting to distress sales to woo homebuyers and raise money as the Covid-19 pandemic continues to wreak havoc with the realty sector.
According to Knight Frank, a real estate consultancy firm, this is one of the toughest phases for the realty sector. “Builders need money for their projects and hence, are giving discounts in the range of 8%-18% to woo homebuyers. Since we see no solution in sight, we may even see more reductions in the coming days,” said Gulam Zia, executive director, Knight Frank India.
MMR, which covers regions like Mumbai, Thane, Navi Mumbai and Raigad, is regarded as a prime realty market in India. However, builders have hardly recorded any sales in the past couple of months.
The situation can be gauged from the fact that realty sales from April to June this year declined to a low of 2,687 units, compared to 15,959 units sold in the January-March quarter.
According to the Builders Association of India (BAI), builders are now being forced to make distress sales. “Builders are facing acute monetary crises as there are no sales taking place,” said Anand Gupta, committee member, BAI.
“Even those who have booked their apartments are now cancelling their bookings due to job losses. This is impacting us in a big way. “We are left with no alternative but to cut prices to raise money,” he added.
One of the biggest fears builders are facing is that once the loan moratorium ends in August, banks will line up for payments from September onwards. Also, financial constraints will delay projects, making the whole scheme unviable, leaving the builder saddled with huge losses.
Rajesh Vardhan, managing director, Vardhman Group, blames the banks and financial institutions for the mess. “For years, these banks and financial institutions made a fortune from real estate, and now when we need their support, they are not forthcoming. All we demand is a restructuring of our loans,” said Vardhan.
Despite the discounts, homebuyers are still not taking the bait. “It is a very insecure job environment and not the right time to take a risk,” said Rahul Rajan, a senior executive at a private firm.