Informist, Tuesday, Mar 28, 2023

By Shiladitya Pandit

MUMBAI – The festival season usually sees real estate developers offering various incentives to home buyers, including direct discounts, flexible payment options, and freebies like gold coins, white goods, furniture and automobiles. This year, however, such sops are few as costs are rising and demand is already high.

Lower levels of inventory have also reduced the impetus for developers to offer heavy discounts and offers. 

Usually, the extent of the incentives depends on the sentiment prevailing in the housing market. "In tough times, the quantum of incentives goes up to around 3-5% of the value of the home," said Vivek Rathi, director of research at real estate consultant Knight Frank India. "Now that demand for homes is strong, there are token incentives from developers in value terms. These have a marginal impact on the price… of around 1%. These are more to support the sentiment of home purchase during the festive season, not to push sales." 

The demand has been encouraging so far this festival season. Mahindra Group-owned Mahindra Lifespace Developers Ltd said that Mar 22, which coincided with festivals of Gudi Padwa and Ugadi, was its best day in the ongoing quarter. "We had a very good number of walk-ins and bookings, and many also took possession of their homes because of the significance of the day," Chief Sales and Service Officer Vimalendra Singh told Informist.

Moderate interest rates and changing demographics have also helped in allaying any concerns about depressed home sales, he said. "While interest rates have been moving up, they are lower than around a decade back when they were above 9-9.5%. Salaried employees have received handsome increments over the past two years. More younger people are also purchasing homes, including in the range of 30-31 years," Singh said.

Another reason for the lack of aggressive incentives this year is the rise in costs of key inputs such as steel, cement, labour, and finance. "…we are giving some offers here and there. But right now, it is not a good idea to give more incentives because of the cost escalation in construction. Most developers have taken a price hike over the past year due to the cost of steel, cement and other inputs," said Kamal Singal, managing director and CEO of real estate developer Arvind Smartspaces Ltd.

"Incentives vary between each micro-market," he added. 

However, incentives still play a role in pushing sales by banking on sentiment, Singh said, while noting that house prices have been rising for the past 18 months.

In India, the festival season, especially the new year across various regions, is usually a large driver of home sales. This is especially true for Maharashtra, home to the two major housing markets of Mumbai and Pune.

Some observers say that the quasi-religious aspect of buying a home, such as doing it on the day of the regional new year celebraion like Ugadi, is on the wane.

"Over the years, the religious aspect of increased home-buying sentiment during the festive season has waned to some extent," said Santhosh Kumar, vice-chairman of real estate consultant Anarock Group. "Purchase decisions are now driven as much by the overall value proposition as by the religious sentiment and muhurat. However, the festive freebies and discounts often doled out by developers do add to the value proposition," he said.  End

Edited by Namrata Rao

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