MUMBAI: Post demonetization, many home buyers are sitting on the fence and are not ready to buy homes in the hope that property prices will come down. Now in order to get these uncertain buyers back into the market, many developers in Mumbai have come up with price protection or price assurance schemes.
“When the prices rise, you benefit. When the prices fall, we compensate,” these are a sample of the emails and Whatsapp messages offering price protection or price assurance schemes doing the rounds in Mumbai’s property market. Many big developers like Lodha, Radius, Runwal, Ajmera and Prajapati have put out advertisements asking people to not hold back their property purchase in the hope of price correction. Instead, they are asking people to buy property and in case the prices do fall, they are promising to compensate them with the difference.
“We are saying that if they are buying at a particular lump sum cost and if we sell a similar flat on the same floor a year down the line and if it is proven that we are selling it at a lower price, we will pay the difference,” says Rajesh Prajapati, MD of Prajapati Constructions
“With this kind of assurance coming from the developer, it gives confidence to the buyer that at least he or she is secured. In today’s market, if you are giving such assurances, it will definitely help in getting a positive response in the market,” says Dhaval Ajmera, Director of Ajmera Realty
So farm many developers are sticking to contacting prospective customers and offering them these schemes through social media and emails. However, some of them are willing to give their word in writing that if there is any price correction, they will pay the difference. Will that be enough? We can’t be sure, but realtors say enquiries about these schemes are rising.
“After 10-15 days we saw clients coming back and enquiring if there was going to be any price reductions and what should they do in such a case. Should they wait or should they take their time? That was the trend that we saw post demonetization. But now, since it’s been more than a month and a half, more people are coming back because of these assurance schemes given by the builders,” says Indu Sadh, Director of Mumbai Property Exchange
While that may be true, experts are warning homebuyers no to go ahead with such schemes without first obtaining a watertight agreement.
“Such contracts won’t stand in the court of law also. What buyers will have to insist is you give us a specific scheme and contract which is neither vague nor uncertain. Suppose you buy a flat in Andheri and the price of the flat is Rs 10,000 to Rs 30,000 per sq. feet. Then the agreement should say at the time of possession of the flat, if the price has lowered by X amount, then price will be reworked on the basis of the concluded contract in that month,” cautions noted property lawyer Uday Wavikar.
If brokers are to be believed, thanks to such price protection schemes, the number of enquiries has gone up by almost 50%. And in case you too are considering this, our advice to you is to do your due diligence first.