Given the tough economic environment amid the covid-19 crisis, many people have postponed their homebuying decision due to job insecurity and low hopes of pay hikes. However, in order to woo buyers, developers are showering offers and discounts, ranging from flexible payment plans, cash discounts, free-parking space to foreign trips ahead of the festive season.
Real estate sales generally pick up during the festive season, as many people plan their purchase during this time of the year. Let’s look at the current schemes on offer and are they good enough?
There are a variety of schemes that developers have come up with. “Apart from the regular freebies, many of the developers are offering different types of payment plans, including no EMIs till possession or booking at 10% and rest on possession,” said Samir Jasuja, CEO of P E Analytics, a Gurugram-based real estate research firm.
Around 600 plus developers registered with the National Real Estate Development Council (Naredco) in Maharashtra are offering to pay stamp duty charges on behalf of homebuyers. The offer will be available for purchases made till 31 October 2020.
The scheme has been offered in the backdrop of the recent stamp duty reduction by the Maharashtra government.
Last month, Maharashtra reduced the stamp duty on property registration by 3% from 1 September to 31 December 2020, and by 2% from January 2021 to March 2021. Earlier, stamp duty charges were 5% in key cities such as Mumbai, Pune, Nagpur and Nashik, while 6% in others.
Stamp duty is a state levy paid to the registrar. It is a fixed percentage levy and is charged on the transaction value or circle rate (minimum price of a property as per government), whichever is higher.
However, experts believe that as the government of Maharashtra has already reduced the stamp duty charges such discounts may not be enough to lure the buyers.
“Its a welcoming move, given the fact that the developers are realizing the problem of affordability and coming forward with schemes to offer discounts,” said Pankaj Kapoor, managing director, Liases Foras. “However, I feel that the discount of around 2% is meager, given the fact that the government has already reduced the stamp duty charges. Developers need to consider giving a further discount of 10-12% in property prices to make houses affordable and attract buyers,” he added.
Jasuja of PropoEquity believes that even after these discounts, sales are likely to remain below the pre-covid-19 levels, given the bleak economic scenario.
“During the April-June quarter, residential real estate sales dropped around 60-65%. During the festive season, there is hope that the sales may improve, but utmost may reach 50-60% of the pre-covid-19 level,” he added.
Most of the sales are happening in the ready-to-move-in segment, as people are preferring these over under-construction properties due to the execution risks in the later. “Therefore, most of the offers are available on the under-construction space, we aren’t seeing much discounts in the ready-to-move-in space,” said Jasuja.
Therefore, homebuyers should be mindful of the execution risk when buying an under-construction property and shouldn’t base their decision solely on the discount or scheme on offer.
“Freebies are also meaningless if the property doesn’t match the buyer’s requirements. They can be considered a welcome add-on for a good property, but freebies should never sway a property purchase decision. They add nothing to the inherent value of the property and fly-by-night developers often use attractive freebies as red herrings to distract buyers from inherent flaws in the project,” said Anuj Puri, chairman, Anarock Property Consultants.