Is the real estate slowdown finally forcing Mumbai-based developers to come face to face with ground realities? Reports are coming in of developers slashing prices, and offering cleverly packaged pricing schemes to attract buyers.
Prices Slashed To Attract Buyers
It is no secret that the real estate sector in Mumbai has been struggling. While demand exists, sales are down with potential home buyers waiting for prices to fall. So far, developers have refused to cut prices in order spur demand, but that trend seems to be changing.
“There is a marginal adjustment that has been done by many developers across the region. We have seen people brining in sensible pricing in order to give opportunities to people to buy. For our Kandivali project, we have launched 1-bedroom apartments at a base price of Rs 43 to Rs 44 lakhs. Normally, projects are priced much higher in this area.” claims Tejas Vyas, director of the Oyster Group and a committee member of builder lobby MCHI-Credai.
Industry reports suggest that developers in the Western and extended Western Suburbs including Vasai-Virar have started offering discounts of 10% to 15% on their projects. Meanwhile, bigger developers who don’t want to openly declare price cuts are marketing their projects through special all-inclusive prices that are less than the market rate. Floor-rise premiums and other extra costs are also being waived off. One of the city’s biggest developers, Omkar Realtors is even offering an extra car-parking slot in one of its projects.
“This is the first time we are providing 2 car-parking slots in our 2-bedroom apartment projects and we are giving the second one free of cost. Any customer who avails of this offer will get a benefit of at least Rs 15 lakhs immediately with further appreciation expected once the apartment is handed over.” says Devang Varma, director of Omkar Realtors & Developers
A High-Volume, Low-Margin Game
The pricing strategy seems to be having some effect. Data from Knight Frank shows that sales in Mumbai in the first half of 2016 actually grew by 23% compared to the same period in 2015 with Thane and Western suburbs seeing demand grow by 47% and 29% while the peripheral Central and peripheral western suburbs grew by 9% and 21%. With inventory levels piling up, real estate experts say developers have finally realised that they need to focus on volumes and not margins if they want to survive the current real estate slump.
“We have to conclude that developers are not finding enough buyers out there and that is why they are doing this. While most such schemes were earlier restricted to the festive season, today we are seeing it being offered almost every other day. If the market continues to be the way it is today and more and more developers realize that they need to boost volumes, we would see more of a reduction in prices going ahead.” says Gulam Zia, executive director of Knight Frank India
All of this means the next 6 months may see a lot of opportunities for home buyers to invest in property at more attractive prices.
Watch Out For Hidden Costs
While that is good news for home buyers, experts are cautioning people to be wary of the fine print. For instance, an all-inclusive price may have hidden costs penciled in. Some of the more interesting offers are for pre-launch projects which can take years to complete and may even face delays.
“As you know there are not many investors in the market and to get these investors back many investors are offering this kind of pricing on their pre-launch projects. End users are definitely going to be skeptical about going into a project at such an early stage.” warns Paresh Karia, founder of real-estate consultancy Easy2ownEstate
Developers will of course try to make as much money out of the deal as possible, so if you are looking at buying property, make sure you do your homework. But regardless of that, any move by developers to cut prices is a big relief for buyers and one can only hope that this helps break the real estate slump and get the market back on track.
Nikhil Narayan Sivadas, Assistant Editor, NDTV