Did Discounts Drive Realty Deals In FY16?

The financial year 2013-14 (FY14) was not a good year. Another financial year passed but there was nothing to cheer about for the real estate sector in FY15 as well. It took some time for the stakeholders to realise they might be headed towards a rough patch because all this while real estate had remained the safest bet. However, as the slowdown was looming large over the realty sector in India, it was time for all the stakeholders wake up and act.

The government ushered in several reforms to change the picture. The Reserve Bank of India implemented major reductions in home loan interest rates; the Union Budget offered several sops to new home buyers and the home-buying process was made easier. While all this brought some hope and relief, the expected results were still a distant dream. According to the PropTiger DataLabs report for FY16, homes sales across the nine major cities of India saw a year-on-year (YoY) decline in the range of 51 to 21 per cent. Except a couple of cities, property prices, largely saw a downward spiral across cities, while inventory pile swelled up.

Of the nine cities, comprising Ahmedabad, Bengaluru, Chennai, Gurgaon (including Bhiwadi, Dharuhera and Sohna), Hyderabad, Kolkata, Mumbai (including Navi Mumbai and Thane), Noida (including Greater Noida and Yamuna Expressway), and Pune, real estate in the national capital region has been the worst affected.

To save the day, developers lent a helping hand to the government. While severe cash crunch, lower profit margins, falling sales numbers and an over policy paralysis may have pushed them to revise prices, most developers kept them unchanged. Several developers also came up with attractive discounts to bring home buyers back to the market.  According to the report: “Customer-centric financing schemes were rampant throughout the year, where a majority of developers joined hands with financing companies and banks to make property purchase more convenient and cost-effective from a buyer's point of view.”

“Under such schemes, developers are going all out and offering huge relaxation in down payment and equated monthly instalment options, too,” the report adds.

A majority of home buyers were wary of investing in under-construction properties because they had to pay their EMIs along with monthly rents. Offers that gave them an option to start paying the EMI only after getting possession acted as a buffer which pushed sales.

The festive season in October-December saw renewed efforts from the developers to drive the property market in the right direction. According to the report, developers offered additional freebies like gold coins, furnishings, air conditioners, modular kitchens and wardrobes on the purchase of housing units.

Developers also offered automobiles, waivers on floor rise charges, stamp duty and registration fees, membership of premium clubs and holiday packages to market some of their luxury projects, the report adds. In a lacklustre market, their efforts did make some impact in the short run.

The report says that developers will keep coming up with innovative offers to increase sales, a good forecast for prospective home buyers.