Bright & Shining: Will The Festival Season Set Real Estate Revival In Motion?
Immediately after announcing a repo rate cut of 50 basis points (bps) on September 29, Reserve Bank of India Governor Raghuram Rajan dismissed the move as being a festival offer. “We were not throwing out Diwali bonus,” he had said. However, the RBI move has, without a doubt, set the festive mood in motion in the Indian real estate market. Real estate in India, which has had a sluggish start this year, is eyeing the festive season for better sales.
The month-long festive season that begins on October 13 will see most Indians making fresh investment across businesses.
The doles
This year, developers started doling out freebies and discounts offers ahead of the festive season. Sector players have been under tremendous pressure to sell due to a large number of unsold inventory lying with them. They hope the festive season would help them clear these out.
“Festivals in India are not merely a merry-making times; they also play an important role in boosting the country's economy,” says Aman Agarwal, Director, KV Developers. “While buyers across the country have been in a wait-and-watch mood, the festive season is likely to kick start activity. The overall market sentiment has also improved, which would further help buyers in making the investment decision,” he said.
From easy financing schemes to free international air tickets, developers are doling out a slew of offers this season. These include offering branded air-conditioners, modular kitchens, four-wheelers, free car park space and gold coins for free on each purchase. Some companies are also waiving floor-rise charges. While opting for upper levels in a building, the buyers has to pay some extra amount, called a floor-rise charge (FRC) .
To attract more buyers, developer associations are also organising property exhibitions across cities. Reports show recent property expos have attracted large number of visitors.
Banking on banks
Banks have also set out to pass on the benefits of RBI's recent rate cut to home buyers. India's largest lender, State Bank of India, started this process by reducing home loan lending rate by 20 bps, setting the new rate at 9.55 per cent for men and 9.50 per cent for women. HDFC, ICICI Bank, Axis Bank, Bank of Baroda, Standard Chartered, Canara Bank, among others, have also lowered lending rates.
Many banks and financial institutions are also offers borrowers discounts during this festive season. These include waiving the home loan processing fee, etc.
Price correction likely?
Earlier, the RBI governor had said that rate cut alone would not revive sales in real estate, adding that developers must come up with price correction measures. Now, while many developers say that there is no margin left for them for further cuts in prices that are already low, sector experts feel price correction is the only way to attract new buyers. Some reports predict a price correction may take place during this season.
Changing trends
On whether sales will pick up during this festive season or not, expert and players views are divided. Some say that unlike in the past, festive season does not really matters to new home buyers. From buying on an auspicious occasion to taking a decision at the right, there has been a clear shift in the purchase pattern among India's young home buyers. Some, however, say there will be a marginal improvement in sales demand during the festive season. Developers believe the festive offers and discounts would definitely help fence-sitters to take a decision.